Hillary Clinton and Bernie Sanders have spent a lot of time talking about prescription drug costs on the campaign trail, but the senator from Vermont is the first prominent candidate to roll out a detailed plan to lower prices.
The centerpiece is a familiar idea among Democrats: Allow Medicare to negotiate directly with drug companies. Right now, private plans do the negotiating under Medicare Part D and the government is explicitly barred from playing a role under the 2003 law that created the prescription drug benefit for the senior insurance program.
It’s a popular idea and unlikely to be controversial within the party. An August Kaiser Family Foundation poll found that 83 percent of Americans supported the policy and 72 percent thought it would be effective. President Obama proposed direct negotiations for specialty drugs in his 2016 budget, and Clinton has said that the government should “drive a harder bargain negotiating with drug companies about the costs of drugs.”
The proposal comes as Sanders continues his striking rise in the polls: He still trails nationally by double digits in most surveys, but recent results in Iowa and New Hampshire have shown him with a lead over Clinton. Now he’s setting the terms for the debate on an issue that voters have said they want addressed.
Sanders cited the Kaiser poll findings at a press conference Thursday at the Capitol announcing the legislation, cosponsored by Rep. Elijah Cummings of Maryland. That survey also found that 72 percent of Americans think that drug prices are unreasonably high.
“When a huge majority of the American people want us to take action, when 74 percent of Republicans and 93 percent of Democrats want the federal government to negotiate with the drug companies to lower prices, the time has come to say ‘enough is enough,’” Sanders said. “We cannot let the drug companies continue to rip off Americans who are suffering any longer.”
It remains to be seen whether there will be any daylight between Clinton and Sanders on this issue. A Clinton campaign aide told National Journal that a plan addressing prescription drug costs would be forthcoming.
The Medicare negotiation proposal has been out there for a while and it’s popular—the only question, then, is how much good it would actually do.
It seems intuitive: Medicare is the biggest single payer for health care in the United States. It often sets templates that are followed in the private sector. And in particular, Obama’s proposal targeted the specialty drug arena where there is less competition and therefore less leverage for the private plans in their negotiations with drugmakers.
But in the past, the Hill’s official scorekeeper, the Congressional Budget Office, “has been reluctant to assign savings to proposals involving government negotiations of drug prices,” said Tricia Neuman, director of the Kaiser Family Foundation’s Medicare policy program.
“CBO tends to look for hard evidence to generate savings estimates, and for some quantifiable basis for assigning savings,” she said. “So far, the proposals for government negotiations have been fairly broadly written without specifics that CBO often needs for savings estimates.”
To wit, the Kaiser Family Foundation’s review of Obama’s budget assigned no budget impact over 10 years to the president’s proposal for Medicare negotiations for specialty drugs.
Proponents assert that the upside could be significant. Sanders’s office cited findings from the liberal Center for Economic Policy and Research that the federal government would save $541 billion over 10 years if Medicare negotiated prices that were similar to what’s paid in other industrialized nations.
Another key element of Sanders’s plan is requiring major disclosures from drugmakers about what it costs to produce their medicines: research and trial costs, how much costs were offset by federal grants or tax credits, and the prices they charge and profits they yield for the same drug in other countries. It’s another popular proposal—86 percent approve, according to the Kaiser poll—and one that has popped up in states such as California.
But the pharmaceutical industry is set against it, and it has helped kill such legislation, including the Golden State’s, per Governing magazine. Drug companies have argued that the disclosure requirements would be burdensome and discourage investment and innovation.
PhRMA, the industry trade group in Washington, also criticized Sanders’s call for direct Medicare negotiations in a statement, saying that “too often, discussions about costs focus on the 10 percent of health care spending that goes toward innovative, lifesaving medicines rather than looking at the big picture and ways that medicines can help avoid other unnecessary care—while ignoring how the marketplace for medicines works to hold down costs.”
“Shortsighted attempts to arbitrarily cap spending would send a signal to researchers and investors that innovation is no longer valued and would result in fewer treatment options for patients,” the group said in a statement responding to the Sanders legislation.
That opposition will be a critical test for Sanders or any other president in 2017 trying to address the drug-cost issue. As Sanders himself put it Thursday, “I know how hard it will be to defeat the prescription drug industry. In fact, to my knowledge, the prescription drug industry has never lost a battle on Capitol Hill.”