All 10 Democratic candidates for president who’ve qualified for the debate on Thursday, September 12 have voiced support for various pieces of legislation to lower drug prices. Some of their ideas even align with proposals from President Donald Trump, including letting Medicare negotiate drug prices with pharmaceutical companies. And all would take some freedom away from drug makers for setting, and changing, prices. But are these ideas feasible?
Some drug industry analysts are skeptical, because many of the measures would require Congressional action. “Any president has a very limited ability to act unilaterally when it comes to domestic policy,” says Evan Zoldan, professor of law at the University of Toledo. “It’s not just about an idea being popular — it would require Congress to pass a law to make it happen.”
That said, there’s little doubt consumers are demanding action on high drug prices. When Next Avenue asked readers to name the issues that mattered most to them for the 2020 election, more than 21% cited health care as a top concern, including prescription drug prices.
There’s little doubt consumers are demanding action on high drug prices.
Next Avenue reader Vince Stevens called prices for prescription medicines “out of hand.” He noted that even some generic drugs that have been sold for a half-century or longer have seen huge price hikes, while branded prescription drugs can cost much lower overseas. “We are subsidizing manufacturers for lower pricing in other countries,” he said.
New Ideas for Lowering Drug Prices
Challenges aside, some 2020 Democratic candidates for president have offered new ideas, including using lower prices charged in other countries as a benchmark for how to set prices in the U.S.
Sen. Kamala Harris, for example, proposes letting the U.S. Department of Health and Human Services set prices so prescription drugs wouldn’t exceed 100% of the average price in comparable developed countries, such as Canada, Japan or Australia. Any pharmaceutical company profiting from pricing a drug above that level would pay a 100% tax rate. Those taxes would then be returned to consumers as rebates, Harris says.
Other countries routinely price drugs by taking an international view, notes Falguni Sen, professor of strategy and statistics at the Fordham University Gabelli School of Business in New York. But they use a benchmark against the U.S., because we’re usually the first ones to enter the market with a particular price,” says Sen. “Now [Harris] is saying ‘we’re going to reverse that.’”
Harris’ idea, similar to one to lower drug prices proposed by Sen. Bernie Sanders, raises other complications. For example: pharmaceutical companies could find ways to work around it.
“I imagine that if the U.S. price is determined based on prices in Canada, Australia and so forth, global drug companies might just increase the prices they charge outside the United States,” says Jason Parish, a litigator specializing in health care and life sciences for Buchanan, Ingersoll & Rooney in Washington, D.C.
Boosting Low-Cost Generics
Sen. Elizabeth Warren sees a potential solution to high drug prices in encouraging the development of less expensive generic medicines. Last December, she introduced legislation that would let the U.S. government manufacture generic drugs itself or contract out the manufacturing of generics that are too pricey because only one or two companies are making them.
“The solution here is not to replace markets, but to fix them,” Warren said in a statement at the time. The proposed law, she added, “will introduce more competition into the prescription drug market and bring down prices for consumers.”
Perhaps, but any attempt to turn the government into a drug manufacturer “would be unprecedented,” Parish says. “The proposal is good in that it would allow the government to intervene where there is no competition. But it’s questionable as to how effective it would be.”
That’s because even though generic drugs comprise 90% of prescriptions, they only account for 22% of total drug spending, according to the generic advocacy group Association for Accessible Medicines.
And the government would likely face the same challenges that have driven many drug makers out of the generic market, including unpredictable costs and supplies of raw materials. “To the extent there are pricing or supply issues, the government as a manufacturer would run into the same issues that have faced the private market,” Parish says.
Several of the 2020 candidates are also talking up ideas that have been proposed in the past.
Allowing Medicare to negotiate drug prices, for one, has garnered support from Warren, Harris, former Vice President Joe Biden and virtually all the other candidates who’ll participate in the upcoming debate. But when the Medicare Part D drug plan was created in 2006, it didn’t include a mechanism for negotiation. “So, we need new legislation to be able to do it, and that will be a hurdle,” Sen says.
Another well-trodden proposal is to permit the importation of low-cost prescription drugs from Canada — an idea championed by Sanders who introduced a bill earlier this year to do it. In July, he accompanied a group of Americans with diabetes to Windsor, Ontario, to make the point that insulin there costs one-tenth what it costs in the U.S.
Interestingly, Trump proposed a similar drug-importation plan a few days after Sanders made that trip. But health authorities in Canada spoke out against the plan, fearing it will exacerbate drug shortages there.
This idea was the latest from Trump aimed at reducing drug prices, but which has run into obstacles. Earlier this summer, as Next Avenue noted, he tried shaming drug companies into charging less by requiring them to disclose prices in TV advertisements. But a group led by drug makers Merck and Eli Lilly successfully sued to block the rule on the grounds that the government didn’t have the authority to require such disclosures.
That could offer a preview of the challenges likely to face the 2020 contenders for the Democratic nomination.
In addition to mounting legal challenges, the pharmaceutical industry spends millions on lobbying and has been effective in knocking down legislation designed to limit pricing power. Last year, the industry trade group Pharmaceutical Research & Manufacturers of America spent a record $28 million on lobbying, according to OpenSecrets.org.
“The ultimate issue will be how to get anything through a Republican-controlled Senate,” Parish says.
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