Prescription drug prices are out-of-control thanks to the anti-competitive tactics and price-gouging practices of Big Pharma. Despite an escalating crisis of affordability, made worse by the economic impact of the COVID-19 pandemic, brand name drug companies continue increasing prices and fighting to evade responsibility.
In the midst of America’s battle against the pandemic, Big Pharma hiked prescription drug prices — increasing prices on at least 42 brand name drugs in the first week of July 2020 alone. In January of this year, Big Pharma hiked prices on more than 600 drugs by an average of 5.2 percent. Last summer, Big Pharma hiked prices on 104 drugs by an average of 13.1 percent. Over five years, Big Pharma has raised the price of brand name drugs at 10 times the rate of inflation.
Engaging in price hikes during a pandemic, while receiving billions of dollars from taxpayers to help develop COVID-19 treatments, demonstrates why policymakers must act to hold Big Pharma accountable — and why now is NOT the time to revisit or implement the misguided Rebate Rule that would hand Big Pharma a bailout at the expense of American patients, seniors and taxpayers.
In January 2019, the U.S. Department of Health and Human Services (HHS) introduced a misguided proposal, known as the Rebate Rule, that would eliminate a key negotiating step that serves as the only real check on the pharmaceutical industry’s unilateral control over prices.
On July 11, 2019, the administration pulled the plug on the Rebate Rule:
The administration made the right call last year to halt this policy. If implemented, the Rebate Rule would:
When seven pharmaceutical executives appeared before the U.S. Senate Committee on Finance in February 2019, Chairman Chuck Grassley (R-IA) pointedly asked the companies whether they would “commit to lowering [their] drug prices” should the Rebate Rule be finalized. The executives’ answers were laced with qualifiers from “that definitely would be my goal” to “we would try to” and even complete pivots such as, “[l]owering list price has to be linked into better access and affordability at the counter for the patients.”
Their answers underscored a key flaw in the premise of the rebate rule: Nothing in the rule guarantees drug makers will lower list prices by the full amount of existing rebates, alter how they price prescription drugs or stop the industry’s never-ending price hikes. In fact, the elimination of rebates would hand more power to drug makers to unilaterally determine price.
American Enterprise Institute Scholars Joseph R. Antos & James C. Capretta: “Undercutting The Ability Of PBMs To Secure Rebates Would Shift Power And Leverage To Drug Manufacturers. It Is Hard To See How Taking That Step Would Lead To Lower Overall Costs For Consumers.” (Joseph R. Antos & James C. Capretta, “Assessing The Effects Of A Rebate Rollback On Drug Prices And Spending,” Health Affairs, 3/11/19)
Jack Kemp Foundation Fellow Ike Brannon: “Ending Drug Rebates Will Not Reduce Drug Prices. The Administration’s Proposal To End Rebates Fundamentally Misdiagnoses The Problem With Medicare Part D: Rebates Are An Effect And Not The Cause Of Higher Drug Prices For Seniors. What’s More, Rebates Are Arguably The Only Mechanism Keeping Drug Prices In Check.” (Ike Brennan, “Ending Drug Rebates Will Not Reduce Drug Prices,” Forbes, 4/22/19)
Memorial Sloan Kettering’s Center for Health Policy And Outcomes Director Peter Bach: “I Don’t Think It’s At All Plausible That We Could Guess With A High Degree Of Certainty That This Degree Of Change Would Result In Savings Or Even Flat Premiums.” (Sarah Owermohle & Sarah Karlin-Smith, “Prescription Pulse: Will Dropping Rebates Raise Premiums? Azar Says, No,” POLITICO, 3/18/19)
Manatt Health Senior Advisor Ian Spatz: “I Have Never Seen A Regulatory Impact Statement On A Proposed Rule State So Clearly That The Impacts Are Impossible To Know And That The Best Analyses Suggest Some Very Negative Results Such As Higher Premiums In Medicare Part D And Overall Higher Drug Costs.” (Nicholas Florko, “Will Trump’s New Drug Rebates Proposal End PBMs? And 6 Other Burning Questions About The Idea,” STAT, 2/1/19)
New Hampshire Health Care Association President & CEO Brendan Williams: “The Real Point Of All Of This Appears To Be To Confer Further Riches Upon Drug Companies And Medicare Advantage Insurers, With Ending The Drug Rebates Adding Up To $196.1 Billion In Federal Spending By 2029, According To The Trump Administration’s Own Figures.” (Brendan Williams, “My Turn: Trump Administration Keeps Making Life Harder For Older Americans,” Concord Monitor, 3/19/19)
Axios: “One Thing That Is Pretty Certain: Pharma Wins. There’s No Mandate To Lower List Prices, And Drug Companies Would Get To See Competitors’ Rebates.” (Bob Herman, “Taking Stock Of Trump’s Drug Rebate Proposal,” Axios, 2/4/19)
Last year, a national survey commissioned by the Campaign for Sustainable Rx Pricing (CSRxP) and conducted by Morning Consult found that Americans from across the political spectrum opposed the administration’s proposed Rebate Rule, noting serious concerns with its projected effects on Medicare Part D premiums and federal spending. In addition, the survey found Americans believe pharmacy benefit managers (PBMs) play a key role in the system.
A new national survey, commissioned by CSRxP and conducted by Morning Consult in June 2020, found American voters overwhelmingly blame Big Pharma for rising prescription drug prices, believe pharmaceutical companies still put profits over people and back market-based solutions to hold drug companies accountable and lower drug prices.
Big Pharma is busting profit and revenue expectations and receiving billions of dollars in research funding from taxpayers while millions of Americans are struggling. Engaging in price hikes during a pandemic, while receiving billions of dollars from taxpayers to help develop COVID-19 treatments, demonstrates why policymakers must act to hold Big Pharma accountable – not reward them with a more than $100 billion bailout at the expense of American patients, seniors and taxpayers. Policymakers should instead focus on advancing bipartisan, market-based solutions to lower prescription drug prices and hold Big Pharma accountable for their price-gouging behavior and anti-competitive tactics.