To Really Build Back Better, Put Patients First

 Lawmakers just unveiled their latest plan to bring down drug costs – they're calling it the Inflation Reduction Act.

The proposal is stitched together from the remains of Build Back Better, the stalled cornerstone of President Biden's domestic policy agenda, which Senate Democrats are fighting to get back on track.

It's good that lawmakers are continuing to push for drug pricing reform. After all, one in four prescription-drug takers in the United States say it's difficult to afford their medications. Among those with serious or chronic health conditions – which impact over half of U.S. adults and a disproportionate number of Medicare beneficiaries – affordability is an even greater concern. 

The proposed legislation does not address some of the fundamental problems of how drug prices are currently set. The focus on drug prices provides an opportunity for a broader policy debate over the role of middlemen in the system and where rebates go. Unfortunately, this legislation ignores the broader policy challenges facing the price setting process and relies on “negotiations” between HHS and drug manufacturers. This approach leaves intact a system that needs broader structural reforms. 

It may come as a surprise to some, but drug companies don't have the power to set prices for their products unilaterally. In order to get their drugs covered by insurance plans, pharmaceutical firms must work with insurers to negotiate prices both parties deem fair. Insurers frequently employ intermediaries known as pharmacy benefit managers, or PBMs, to manage these negotiations.

The current drug pricing system is complicated and includes incentives to increase list drug prices each year. Higher list prices yield more rebate dollars for PBMs.

The resulting discounts and rebates provided by drug companies are substantial – last year, their total value was $204 billion. PBMs pass most of these discounts to insurance companies, which in turn are able to set lower monthly premiums.

These lower premiums are great, but Medicare patients would benefit significantly more if they could simply receive those rebates themselves, in the form of lower copay and coinsurance fees for their medicines. According to data from the Department of Health and Human Services, if the law required patients to receive these discounts directly, Medicare drug-coverage enrollees would save more than $83 billion on their prescriptions over the next decade.

In fact, the so-called rebate rule, which was scheduled to take effect in 2027, would do just that, requiring PBMs and insurers to pass along discounts to patients through lower copays and coinsurance.

But unfortunately, the new legislation would further delay the implementation of the rebate rule. 

That would hurt America's most vulnerable patients: those living with chronic illness. Patients with a chronic health condition already spend five times more on health care than others. Passing rebates directly to them would significantly lessen their burden. For example, sharing rebates with people with diabetes would save the average patient close to $800 per year. 

Regrettably, there are other problems with the Inflation Reduction Act.

It would scrap the proposed $35 monthly cap on the out-of-pocket cost of insulin – a broadly popular and bipartisan idea that, like the rebate rule, would help the more than 35 million Americans living with diabetes and is a better approach for patients than what is proposed in the reconciliation bill. It would also allow premiums for Medicare drug-coverage enrollees to increase by 6% annually, rather than the 4% proposed in earlier versions of the legislation.

Meanwhile, the bill would do nothing to reduce coinsurance costs – the percentage of drug costs patients have to pay out of pocket after they meet their deductible. In most cases, coinsurance rates under Medicare are 25% of a prescription's list price.

Together, these omissions mean that millions of American patients – especially seniors and people with chronic diseases – will continue to contend with unnecessarily high drug costs. That could spur many to forgo needed treatments altogether, a phenomenon known as medication nonadherence, which results in around 125,000 deaths each year. 

There are some bright spots in the proposal, like the three-year extension of the expanded subsidies in the ACA. Failure to extend these subsidies would increase the number of uninsured making health care more expensive for patients. But on balance, the plan fails to meet the needs of the very patients it's supposed to help. 

Americans deserve better. As lawmakers revise the bill into its final form, they still have time to deliver.

Kenneth Thorpe is a professor of health policy at Emory University in Atlanta and chairman of the Partnership to Fight Chronic Disease.

https://www.realclearhealth.com/articles/2022/08/05/to_really_build_back_better_put_patients_first_111386.html