The Coming Storm

November 6, 2015

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A sizzling summer of media coverage of rising drug prices – fueled by the made-for-TV news about Turing Pharmaceuticals’ 5000% price hike for Daraprim, a drug approved by the FDA in 1953 to treat malaria and toxoplasmosis – is turning into an autumn of activity on Capitol Hill. As a result, the long-brewing debate over U.S. pharmaceutical pricing is heating up due to some high-profile price hikes, rising spending in the public and private sectors and, most of all, the coming 2016 U.S. elections. While many argue there is more heat than light, recent events point to an intensifying debate. Whether that results in any policy changes is doubtful.

Politicians love data, or at least they say they do. They pay a lot of attention to polls and spending. The first to get elected and the second to avoid higher taxes or deficits. Here are two data points that are already buzzing around Capitol Hill:

  • A study in the Journal of the American Medical Association (JAMA) reported a sharp increase in prescription drug use by Americans. In 2012, 59% of Americans 20 and older took at least one prescription drug a day and 15% were taking five or more a day, almost double the figure in 2000. Among the biggest increases were antihyperlipidemic agents, antidepressants, prescription proton-pump inhibitors and muscle relaxants.
  • The Kaiser Family Foundation’s monthly tracking poll of voters’ priority issues in healthcare found 77% of all voters say their number one concern is making sure drugs are affordable and 63% back government action to lower drug prices. While there were some important differences among Democrats, Republicans and Independents, these issues ranked high among all three. As the chart below indicates, these drug cost issues out-polled repeal of Obamacare, even among Republicans.

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Until now, the speechifying on drug prices was mainly a Democratic pastime. Hillary Clinton, Bernie Sanders and Martin O’Malley have all railed against high prices and put forward a series of policy proposals ranging from allowing Medicare to negotiate prices to opening the Canadian border to drug reimportation (allowing Americans to purchase FDA-approved drugs from other countries that use price controls to limit costs). None of these plans are new and none have moved very far in Congress.

But recently, the issue has started to cross the partisan membrane. Republican Presidential candidate Marco Rubio (R-Fla.) told a New Hampshire audience that “These companies decide, ‘We can get away with charging it, and so we do.’” Rubio turned to prices abroad and noted, “What’s really frustrating is the exact same medicine just across the border is a quarter of the price. So you realize America is subsidizing health care for the world.”

Sens. Susan Collins (R-Maine) and Claire McCaskill (D-Mo.) have announced plans to hold hearings on December 9 before the Senate Special Committee on Aging. This bipartisan pair is focused on pricing practices by four firms – Valeant, Retrophin, Rodelis and Turing. “Given the potential harm to patients across our country who rely on these drugs for critical care and treatment, the…Committee… considers these massive price increases worthy of a serious, bipartisan investigation into the causes, impacts, and potential solutions,” Collins said.

In the House, Democrats are pushing for hearings on drug prices. Oversight Committee Chair Jason Chaffetz (R-Utah) has resisted so far but indications are he might need to yield. Such hearings would likely be a media circus with pharma CEOs being asked to justify their prices in public in front of many cameras.

Finally, HHS Secretary Sylvia Burwell has invited drug companies, insurers, consumers and other stakeholders to discuss drug pricing at a November 20 “forum” in Washington.

All of this will continue to percolate through next November’s elections but it’s critical to note the two parties have diametrically opposing views on what could or should be done. Democrats have traditionally favored market interventionist policies that couldn’t gain Congressional approval even when the party was in control of both houses and the White House. Republicans take a more market-based, laissez-faire approach that usually wins the day (even if by default).

While the storm clouds are gathering, so far, there’s still no sign of rain.