Cap on drug price hikes for privately insured sparks battle

WASHINGTON, -- Families with private insurance could save on prescription drugs thanks to a small provision in President Joe Biden’s sweeping social agenda bill. It is intended to end the cycle of annual price rises for widely used medications.

Cap on drug price hikes for privately insured sparks battle

WASHINGTON, -- Families with private insurance could save on prescription drugs thanks to a small provision in President Joe Biden’s sweeping social agenda bill. It is intended to end the cycle of annual price rises for widely used medications.

Merve Dikici
Merve Dikici
23 November 2021 Tuesday 15:29
359 Reads
Cap on drug price hikes for privately insured sparks battle

WASHINGTON, -- Families with private insurance could save on prescription drugs thanks to a small provision in President Joe Biden’s sweeping social agenda bill. It is intended to end the cycle of annual price rises for widely used medications.

This provision would require drug companies that increase their prices above the inflation rate to receive rebates from Medicare. Private plans that drug companies sell to would be included in the calculation of the penalty. This is similar to a tax on price rises. This issue is dividing business groups and causing a fierce lobbying war.

Corporations that are focused on affordable employee benefits would like to keep the language unchanged. This would ensure price-increase protection for both workers and companies, not just Medicare enrollees. The influential U.S. Chamber of Commerce supports the pharmaceutical industry's push to block price restraints, including inflation caps. They claim they will stifle innovation.

The Senate was sent the $2 trillion Social Agenda legislation by the House Democrats on Friday. This bill, which resets the national priorities on issues ranging from climate to family and life, will be subject to more scrutiny by an evenly divided chamber. Prescription drugs are only one component. Most attention has been on Medicare provisions that will reduce out-of-pocket expenses for seniors and allow them to negotiate prices for a small number of medicines.

However, the inflation caps could have a profound impact on as many as 180million Americans who have private insurance.

Shawn Gremminger from the Purchaser Business Group of Health, said that "a lot of people don’t realize that this bill applies to, and will assist, private insured people." But that's not a guarantee. That would be true, as it stands now. We have been concerned and are still worried about this." His coalition includes nearly 40 large employers, which cover over 15 million workers, retirees, and their families.

James Gelfand, vice president of ERIC (a group representing major national companies that provide employee benefits), said inflation caps would be a "game-changer".

An earlier bill would have allowed inflation rebates to be based on sales to Medicare plans. But the House-passed bill expands the formula to include private plans.

Gelfand stated that if they raise prices on private markets faster than the economy, they will have to return the money to the government. This is done to discourage drug companies from exorbitant price increases.

According to polls, Americans support government action to lower drug prices. Patients' out-of-pocket expenses are high, as well as rising list prices and high prices for new drugs. Although the Biden package would address these issues, Democrats could not agree to allow Medicare to negotiate new drug prices.

Annual price rises for prescribed drugs are more than inflation, though there have been periods when they have been moderated in recent years.

Gremminger stated that his group believes the private sector could save $250 billion in 10 years if the bill's inflation caps are kept. Gelfand says that without them, employers could see an additional 3.7% increase in healthcare costs annually over the usual medical inflation. This is because drug companies may raise prices for privately insured patients in order to pay rebates.

Gelfand stated that it is true that not all business groups are located in the same area. "If you look at the issues from both sides, there are groups that support the business interests of pharmaceutical, and then there is everyone else."

Pharmaceutical Research and Manufacturers of America is the main lobbying group for the drug industry. They believe that inflation rebates would harm innovation that continues after approval of medicines.

Generic drug manufacturers want their products exempt. President of the Association for Accessible Medicines (generic lobbying group), Dan Leonard said that he is concerned about his members being penalized for price hikes up to pennies per dollar. He said that generics will be exempted "if they aren't" from the tax.

Ron Wyden (D-Ore.), Chairman of the Senate Finance Committee, has been a leader in prescription drugs and supports maintaining inflation caps for private insured.

Oponents could file a Senate challenge, arguing that penalizing price rises by one company on the other has no effect on federal budgetary issues. Inflation rebates would not be extended to private insurance plans if the challenge is successful. The caps have a budgetary purpose, according to supporters. They would generate revenue and savings for Medicare.

Katie Mahoney is the U.S. Chamber of Commerce's top health policy expert. She stated that her organization has "very real concern" about the drug pricing provisions. This would reduce incentives for industry to create new medicines and that she is pressing this point in the Senate.

She said, "We continue to hammer upon the damage that such policy would do." "We believe that message is getting through to senators and some members of Congress."

Mahoney was asked about other business groups supporting inflation caps and said that they didn't reflect private enterprise in general.

She said, "When you look at these other organizations they're first of all significantly smaller and have a very narrow policy focus." They don't represent all businesses, but a small and focused group of issues.

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