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Pelosi drug proposal would bring down drug prices

Written by Diane Archer

Politico reports on House Speaker Nancy Pelosi’s drug pricing proposal. If Politico’s information about key elements is accurate, Americans could see prices cut in half for scores of the most widely used drugs. And, the Medicare Part D drug benefit finally will have an out-of-pocket limit.

The Pelosi proposal, as Politico describes it, could link the cost of 250 commonly used brand-name drugs to their average price in six wealthy nations. Since Americans tend to pay about twice as much for drugs as people in Canada and Great Britain, we could see these drug prices drop by 50 percent.

The government would negotiate drug prices for drugs responsible for the highest costs to Medicare and the US health care system. These drugs represent about half of Part D spending and include insulin. Why Pelosi’s proposal only covers 250 drugs and not every drug is an open question.

If the federal government is unable to negotiate fair drug prices with drugmakers, it would use international reference pricing to set these drugs’ prices. They would be set at no more than 1.2 times the average price in six countries: Australia, Canada, France, Germany, Japan and the United Kingdom. International reference pricing is a policy, originally introduced in the Senate by Bernie Sanders and in the House by Ro Khanna, which President Trump has said he supports.

Under the draft proposal, if drugmakers refuse to negotiate with the federal government or sell at the established price to both the government and private health insurers, they would face severe financial penalties. They would pay an excise tax of 75 percent of the gross sales of the drug the prior year. Pharmaceutical companies would face penalties if they offered the drug at the negotiated price to Medicare but did not offer the drug at the negotiated price to private insurers.

While the financial penalty should be severe enough to induce pharmaceutical companies to sell their drugs at the established price, the Khanna and Sanders bills go a step further to ensure drug availability. Their bills would take away a pharmaceutical company’s exclusive license and give licenses to generic drugmakers if the pharmaceutical company set its drug’s price higher than the average in five wealthy nations.

Pharmaceutical companies would not be permitted to increase the price of a drug more than the rate of inflation for as long as there was little or no competition for that drug. Pharmaceutical companies would incur financial penalties if they raised the price of any drug covered under Medicare Parts B or D above the rate of inflation after 2016 and did not either lower the drug’s price or refund the excess charge to Medicare.

Government savings from paying lower prices for drugs under Medicare Part D would go to the NIH to fund more drug research.

Here’s more from Just Care:

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2 Comments

  • Regarding drug prices:. I dropped my drug coverage with UnitedHealth because of their high premiums and copay. I get my Rx from the pharmacy at Costco, and you don’t have to be a member! Their prices, without insurance are far, far cheaper than with insurance. I am saving more than $1,000 a year.

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