Hiking Drug Prices

Blame Congress

The recent Congressional ire at pharmaceutical companies for hiking up drug prices by more than 500% feels justified, and heartening. Yet what Congress fails to recognize, or articulate, is its own contribution in the situation. Congress has played a key role in bringing the situation around to what it is today.

Over the last thirteen years, Congress; led by both parties and their elected presidents; passed legislation that increased taxpayer-financed coverage for prescription drugs.  It did not, however, lay down explicit clauses or mechanisms for increasing prices, or staggering costs, relying on market forces to even it out.

This resulted in increased government-sponsored spending, injection of additional funds in the market, along with the introduction consumer protections that hedged insurers tools used to curtail costs, like annual and lifetime limits on the dollar value of coverage; leaving the door open for pharmaceutical companies to jack the prices.

“The history we see over and over again is that when the government steps in as a guaranteed payer without regard to price, it will be taken advantage of,” said Dr. Peter Bach, director of Memorial Sloan Kettering’s Center for Health Policy and Outcomes.

Legislative History

2003

Under the Bush administration, Congress passed the Medicare Part D prescription benefit provided drug coverage for seniors. Medicare itself was forbidden from price negotiation, leaving private insurers and pharmacy benefit managers to keep costs in check. The introduction of new expensive drugs and hike in older medications was the result of the program that protected beneficiaries from high costs, resulting in drug makers and insurers passing the bill for expensive medication on to taxpayers.

2009

The Biologics Price Competition and Innovation Act (BPCIA) provided makers of cutting-edge biological drugs 12 years of protection from generic competitors, forbidding the FDA to approve any biosimilar drugs before that period of time.

2010

President Barack Obama enacted the Affordable Care Act (ACA) that expanded coverage for the uninsured. Prescription drugs were an essential benefit under ACA, as well as barring dollar limits on insurance coverage. The pharmaceutical industry not only supported this bill but asked that the White House not seek Medicare rebates opposed by drug makers. The Obama administration prevented patients from importing drugs from abroad.

Though there is no single Act or bill to be held solely responsible for the current mess, it is clear that the current healthcare atmosphere, which has cultivated predatory pricing from pharmaceutical CEO’s, was only possible because Congress allowed it to happen, passing legislation without thinking of the consequences, and pitfalls through, and making timely provisions.