August 12, 2021

PBGH Statement on President Biden’s Remarks on Lowering Drug Costs

Addressing health care costs, and in particular the cost of prescription drugs, is an economic issue. Earnings siphoned off by health care costs limit job creation and wage growth, divert investment and cripple competitiveness and innovation. We applaud President Biden for recognizing the underlying problems contributing to high drug costs and committing to take action to address those issues.

The President proposes that Medicare be able to negotiate with drug manufacturers on drug prices, just like Medicare does for all other health care products and services. We support this important change. But it is absolutely vital that drug prices set at the Medicare negotiated rates, and limits on inflation of prices for drugs, are available to the commercial market. Failure to protect the private market would mean that a majority of Americans would continue to see ever higher drug costs. Worse, drug companies could try to offset lower revenues from Medicare by increasing their prices on privately insured people even more.  The President and Congress must seize the opportunity to lower the costs for life-saving and necessary drugs for all Americans.

Industry players will all point fingers at one another, blaming other actors for high costs. The truth is high drug costs are perpetuated by all parties – drug manufacturers, pharmacy benefit managers (PBMs), and hospital systems. Drug manufacturers have steadily increased the price of their products without any justification, and have engaged in egregious anti-competitive behavior, like pay-for-delay and patent evergreening, and that money isn’t being used to create new and innovative drugs. In 2018, 12 of the largest pharmaceutical companies spent more money buying back their stock than they spent on drug research and development.

The three PBMs that control 76% of the market are owned by insurance carriers, calling into question for whom these PBMs are really working on behalf. Certainly not the employers who are nominally their clients. Hospitals have achieved significant new revenues by acquiring specialty practices that focus on drug infusions because private payers pay as much as two times for drug administration in hospital outpatient departments as they do for the same service in a physician’s office or at home.

It’s time for health care stakeholders to subject themselves to the same kind of market forces every other business must contend with – transparency, accountability for quality and outcomes and responsiveness to customers’ needs and experience.