Jonathan Cohn reports for The Huffington Post that Senate Finance Committee Chair, Ron Wyden, just announced his principles for drug price reform. They should appeal to both progressive and conservative members of Congress. They speak to the need for lowering prescription drug costs for everyone in the US, without compromising innovation. Now, we need Congress to pass legislation that adheres to these principles.
Principle number one recognizes that the federal government should have the power to negotiate drug prices directly with manufacturers. That is a no-brainer. Without that federal power, because there is no meaningful drug price competition for brand-name drugs, Congress is allowing pharmaceutical companies to set drug prices.
Because pharmaceutical companies are setting drug prices in the US, tens of thousands of Americans are dying prematurely each year. They cannot afford their cancer, diabetes and heart medicines. If we paid the prices that other wealthy countries pay for drugs, we’d be paying less than half and sometimes as little as one fourth of what we pay today.
The government would negotiate drug prices for people with Medicare, but Senator Wyden wants private health insurers and the people they cover to benefit from lower drug prices, as well. How Congress achieves that goal is an open question. It would be easiest if it gave everyone Medicare simply for the purpose of benefiting from Medicare’s negotiated drug price. That likely won’t happen. Short of that, Congress might be able to make these low prices available through the thousands of Federally Qualified Health Centers.
Senator Wyden does not specify how Medicare would decide the prices of different drugs. He does not call for international reference pricing, which is the simplest way to ensure that drug prices come down without letting politics get in the way. It is the approach described in HR3, the House bill passed in 2019 that would lower drug prices for 250 drugs over ten years.
Some say that international reference pricing is “passing the buck.” They want an “American” solution. Really? If Congress passes it, it will be an American solution. Congress will have to decide which countries it should benchmark US drug prices to and under what circumstances. Congress will still have to decide what happens when Pharma fails to adhere to these prices.
International reference pricing is about as close to a “market solution” as we can get. If Congress allowed drug importation, drug prices in the US would end up being an international reference price of some sort.
Senator Wyden would also cap drug price inflation from one year to the next.
In short, Senator Wyden wants everyone to see lower drug costs at the pharmacy. Good idea. Everyone needs lower drug prices. Moreover, unless everyone enjoys lower prices, the pharmaceutical industry will threaten to raise everyone else’s prices. And, millions of Americans who don’t have Medicare will continue to die prematurely because they can’t afford their medications.
Senator Wyden’s principles for prescription drug reform should also lead to several hundred billion dollars in savings. That’s money that could go towards putting an out-of-pocket cap in traditional Medicare as well as adding vision, hearing and dental benefits.
Senator Wyden recognizes that reining in drug prices will not affect the innovation we need. Rather, it will allow us to direct more money toward critical and effective innovations. Right now, pharmaceutical companies spend relatively little on innovation. Moreover, a lot of their innovation money is focused on developing me-too drugs (variations on a drug already available) that do not add meaningful value.
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