A new report from Sen. Claire McCaskill, D-Missouri, confirms a deep-seated fear for many seniors: the prices of the 20 brand-name drugs that are most prescribed to them have skyrocketed. Over the past five years, the cost of these medications has risen an average of 12% per year, with some doubling in price. Earlier this month, the commissioner of President Donald Trump's Food and Drug Administration called prescription drug pricing a "rigged" system, blaming shady tactics aimed at reducing competition in the pharmaceutical industry.
Big Pharma is jacking up prices for one reason -- because it can. This is why the National Committee to Preserve Social Security and Medicare advocates that Medicare be required (or at least allowed) to negotiate prescription drug prices with Big Pharma -- an idea Republicans have by and large opposed since the Medicare Part D program was enacted in 2003. In fact, the original Medicare Part D legislation forbade the government from negotiating drug prices with manufacturers.
But a new bill introduced by Sen. Bernie Sanders, I-Vermont, Rep. Elijah Cummings, D-Maryland, Rep. Lloyd Doggett, D-Texas, and Rep. Peter Welch, D-Vermont, dubbed The Medicare Drug Price Negotiation Act of 2017, seeks to allow Medicare to negotiate prices with pharmaceutical companies. This is the legislation we need in order to keep drug prices affordable, and Congress should pass it.
Sen. McCaskill likened the perennial drug price hikes to paying an auto dealership a 20% markup on the same model car year after year. Seniors living on fixed income simply can't afford this -- and there are actual life and death consequences. According to a report by the Centers for Disease Control and Prevention, 2 million seniors did not take their medications as prescribed in 2015 due to medication costs. The dilemma of seniors having to choose between meals and pills is very real.
As the price of medications has soared, so have pharmaceutical company profits. Total sales revenue for top brand-name drugs jumped by almost $8.5 billion over the last five years. The Government Accountability Office (GAO) reported that 67% of drug manufacturers boosted their annual profit margins between 2006 and 2015 -- "with profit margins up to 20% for some companies in certain years."
Not only have pharmaceutical companies reaped outsized profits from these price hikes, so have their CEOs. According to a USA Today analysis, the median compensation package for biotech and pharmaceutical CEOs in the Standard & Poor's 500 was 71% higher than the median compensation for S&P 500 executives in all industries in 2015. The CEO of drugmaker Regeneron Pharmaceuticals earned a whopping $47.5 million that year, the top man at Merck pulled in $24.2 million, and the head of Johnson and Johnson received $23.8 million.
It's no mystery why the pharmaceutical companies almost always get their way in Washington. "The pharmaceutical and health products industry ... is consistently near the top when it comes to federal campaign contributions," reports the Center For Responsive Politics. Pfizer leads the pack, showering candidates with over $900,000 in donations during 2017 and 2018, with about 55% going to Republicans and 45% to Democrats.
Still, the Big Pharma cash flooding into Washington has not deterred some members of Congress from taking action to contain rising drug costs. The modification proposed by The Medicare Drug Price Negotiation Act of 2017 is essential to achieving true cost savings for the Medicare program and for seniors who have seen their premiums and copays continue to rise. If we do not allow Medicare to negotiate with drug companies, we will always be burdened with higher and higher costs.
If we want to bend the cost curve for prescription drug prices, we must also scrutinize Pharmacy Benefit Managers (PBMs) -- the middlemen between the insurance companies and pharmacies. Some PBMs excessively mark up the price of prescription drugs at the pharmacy counter and pocket the difference, including rebates, without publicly disclosing their pricing structures. Here, again, commonsense legislative remedies are readily available.
Sen. Ron Wyden, D-Oregon, and Rep. Doug Collins, R-Georgia, have each introduced bills to require greater transparency from PBMs about prices and profit schemes, which is a good start toward reining in these middlemen. Congress could also pass the bipartisan CREATES Act to make it easier for less expensive generic drugs to move through the FDA approval process and get to market more quickly.
Recent polling suggests that Americans are more than ready for corrective action. According to a recent poll from Politico and Harvard's school of public health, an overwhelming 90% of voters favor allowing the government to negotiate Medicare prescription drug prices. The 2018 elections present voters with an opportunity to insist that lawmakers act. If current members of Congress won't enact common sense remedies for what ails our prescription drug price system, let's elect candidates who will.
- Big pharma's cash flood is drowning seniors
- Iran decision; Disney earnings; Big pharma deal
- Trade fears ease; Big pharma deal; Facebook under scrutiny
- Deutsche Bank CEO is out; Big pharma deal; Markets calm
- Big pharma deal: Bristol-Myers Squibb to buy Celgene
- Shutdown continues; Netflix earnings; Pharma takeover
- One state's novel idea to make Big Pharma pay for opioid epidemic
- Trump administration and Big Pharma square off over proposal to televise drug prices
- Big Oil goes from begging for cash to rewarding shareholders
- Sony is cashing in on its big stake in Spotify