As Pelosi Drug Pricing Plan Unfolds, AARP Report Shows 12 Straight Years of Rising Costs

On the same day that House Speaker Nancy Pelosi, D-California, unveiled her plan to lower drug prices by giving the United States the ability for Medicare to negotiate certain drug prices and seek rebates from drug makers if their prices soar above inflation, a new AARP report shows that retail prices in 2017 were 2.1% above the general inflation rate and marked 12 straight years of price increases.
Allison Inserro
September 19, 2019
On the same day that House Speaker Nancy Pelosi, D-California, unveiled her plan to lower drug prices by giving the United States the ability for Medicare to negotiate certain drug prices and seek rebates from drug makers if their prices soar above inflation, a new AARP report shows that retail prices in 2017 were 2.1% above the general inflation rate and marked 12 straight years of price increases.

In the Pelosi drug plan, which will get a hearing in a subcommittee of the House Energy and Commerce next week, the secretary of HHS would be authorized annually to negotiate prices for up to 250 of the most costly drugs that lack a generic or biosimilar competitor, including both Part D and Part B. The maximum price would be determined using a blend of international prices and must not exceed 1.2 times the average price in Australia, Canada, France, Germany, Japan, and the United Kingdom. That is somewhat similar to a proposal from the Trump administration, and insulin would be included.

In addition, HHS will assign penalties to drug companies that refuse to negotiate, starting at 65% of sales for the drug at issue and rising from there; The New York Times notes that is even stiffer than what was proposed in the draft. 

The plan, called HR 3, Lower Drug Costs Now Act of 2019, would cap what seniors pay out of pocket for their medications to $2000 a year. And it would require drug makers to pay rebates to Medicare if they hike their prices beyond the increase in inflation.

The plan was cheered by Ben Wakana, executive director of Patients For Affordable Drugs Now, who says, “Early details of HR 3 clearly deliver on the promise to break the monopoly pricing power of drug corporations by allowing Medicare to negotiate for lower prescription prices. Importantly, the legislation incorporates key bipartisan priorities like an International Pricing Index, caps on price increases, and an out-of-pocket limit for prescription drug spending."

Others are looking to see if the plan (even though it has close to no chance of being passed in the Senate) will boost the use of lower-cost biosimilars.

“All prescription drug pricing efforts can be improved and billions in savings can be realized by realigning Medicare policies to encourage patient use of lower-priced generics and biosimilars,” says a spokeswoman for the Association for Accessible Medicines. Likewise, the president of the Biosimilars Forum, Julie Reed, said any pending bill "needs to include policies that improve patients’ access to biosimilars, which analyses repeatedly show would save taxpayers and the health care system tens of billions of dollars."

Meanwhile, the latest AARP Rx Price Watch report finds that retail prices for widely used prescription drugs increased by an average of 4.2% in 2017, while the general inflation rate was 2.1%.

Leigh Purvis and Stephen W. Schondelmeyer, PharmD, PhD, authored the report, which says that the cost for 1 specialty medication used for chronic disease approached $20,000 in 2017. If the retail price changes for the medication had been limited to general inflation between 2006 and 2017, the price would have been $7263.

The report says that in 2017, the average annual retail cost for 754 brand name, generic, and specialty prescription drugs used to treat chronic conditions was almost $20,000 per year, or nearly 20% higher than the average Social Security retirement benefit ($16,848). The annual drug cost was also more than three-fourths of the median income for Medicare beneficiaries ($26,200) and almost one-third of the median US household income ($60,336), the AARP said.

“If these trends continue, older Americans will be unable to afford the prescription drugs that they need, leading to poorer health outcomes and higher health care costs in the future,” the report says.

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