Opinion | Kamala Harris Can Tout Success at Lowering Drug Prices
Last week, the White House announced a milestone in health care policy. After decades of effort, and for the first time, the government successfully negotiated drug prices directly with pharmaceutical companies. For years, the fight to control health care prices, perhaps the most significant factor in health care spending, has felt like an unwinnable battle, so it’s no small feat that Medicare is finally flexing its negotiating muscles. But it’s also a drop in the bucket.
In a country where an estimated 18 million people are unable to afford the medications they need, reducing drug costs is likely to resonate with many voters. And it’s not surprising that Kamala Harris’s campaign is highlighting this news. It’s a well-deserved victory lap over the fact that the administration delivered on a long-promised reform, and one that advances her commitment to health equity. Many countries’ health care systems negotiate for better prices. Medicare, traditionally, has not. When George W. Bush’s administration passed Medicare Part D (drug coverage), it included language specifically preventing the government from negotiating directly with drug companies. Because of that, most insurance companies contract with pharmacy benefit managers, middlemen who negotiate with the drug companies for specific deals. This complexity can lead to more spending and more frustration.
The Inflation Reduction Act changed that. It established a new drug price negotiation program, allowing the government to negotiate for all Medicare recipients. The first 10 drugs were selected about a year ago, and the agreements’ results, released Thursday, have a projected savings of $6 billion.
Six billion dollars isn’t chump change, and that number will surely grow as more drugs are added to the list for consideration. Ozempic, the blockbuster diabetes drug, could be up for negotiation next year, for instance.
But it’s also a tiny component of the roughly $250 billion part D spends on drugs. It’s an even tinier part of the $4.5 trillion that the United States spent on health care in 2022 alone.
In fact, it’s likely that a fair number of seniors won’t actually feel much of a change in their yearly out-of-pocket costs from these new prices. Many who buy these drugs, even after the reduction, would still hit the cap on out-of-pocket spending that Medicare part D allows. Right now, most seniors who max out their out-of-pocket contributions can expect to pay between $3,300 and $3,800 on prescription drugs. But next year, a new $2,000 out-of-pocket cap will go into effect for everyone enrolled in Medicare, as a result of another provision in the Inflation Reduction Act.
Dr. Stacie Dusetzina, a professor of health policy at Vanderbilt University School of Medicine and an expert on drug pricing, notes that, for individual seniors, it’s that lower out-of-pocket cap that will be most noticeable. Take Imbruvica, which dropped from $14,934 per month to $9,319. “It doesn’t really matter that the price drops by 38 percent,” Dr. Dusetzina points out. “For a patient using that drug, their total out-of-pocket cost will only be $2,000.”
This is probably why the Harris campaign also unveiled a plan to extend the $2,000 cap to all Americans, not just those on Medicare. It’s sure to be popular among many voters, especially those with chronic conditions.
The cost of drugs is a big concern for seniors and a major barrier to health care access. To the extent that the current administration can reign in costs, it could be a major step to greater health equity. Women, Black and Latino people, L.G.B.T.Q. individuals and those with disabilities are more likely to report difficulties affording prescription medications, particularly when managing chronic conditions like diabetes and heart disease.
The Trump administration floated some of these same ideas. It proposed an out-of-pocket spending cap on prescription drugs under Medicare part D, but never implemented it. It also created a pathway to import drugs from Canada, where — because the government takes an active role to ensure lower prices — drugs are often cheaper. Unfortunately, his campaign has provided few specifics as to how he would reduce health care spending if re-elected.
Fixing health care spending is anything but simple. If we reduce out-of-pocket payments, then premiums will go up. This is already expected in Medicare, and the Biden administration is currently planning to cover those increases. But there’s no easy way to cover the premium increases all Americans would experience with reduced out-of-pocket spending. Only by lowering prices can overall spending decline, and that’s why it’s important that the government has now successfully done so, even in a small way.
Of course, not everyone is happy about all these changes. The pharmaceutical industry maintains that this policy of forced negotiation is unconstitutional and is fighting it vigorously in court. Further, all policies, even this one, have trade-offs. Critics warn that these price cuts could stifle innovation, leading to fewer new drugs coming to market and exacerbating the already precarious situation with drug shortages. Robust analyses argue that these concerns may be exaggerated, though. Theoretically, drug companies could also respond by hiking prices in the private sector, affecting millions of Americans with employer-sponsored insurance.
This milestone in Medicare’s negotiating power is a significant step, but it’s just the start. As the Harris and Trump campaigns make promises on drug pricing and health care, Americans will have to decide if these plans are enough to make a real difference in how they vote. Real change to U.S. health care spending will require much more significant intervention, though, and a serious plan that addresses more than just a limited number of drugs.
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