Democrats’ fall on drug prices shows industry power

House Democrats writing the health care provisions of their big social spending bill were aiming high: new coverage for poor Americans without insurance; additional subsidies for people who buy their own coverage; and new dental, hearing and vision benefits for older Americans thanks to Medicare.

To pay them, they also aimed high when it came to lowering drug prices. A measure that would tie the prices of certain prescription drugs to those paid abroad was designed to save the government enough money to offset the costs of these other priorities. The House’s approach, it is estimated, could save the government an estimated $ 500 billion over a decade, with that money coming out of the pockets of the pharmaceutical industry.

But it is risky to bet against the pharmaceutical companies.

Three House Democrats on a key committee on Wednesday rejected the measure. There are still ways for House leaders to keep the provision in the final bill, but the House Democratic majority is so slim that these three lawmakers, if determined, could pose a significant obstacle to l adoption of the wider package.

The dynamic is familiar to lawmakers who have worked on health issues: The healthcare industries are big and powerful lobbies, and they don’t like their revenues being cut. As with measures that could reduce payments to hospitals, doctors and insurance companies, the House’s attempt to take a bite out of the drug companies has generated a backlash.

“I don’t think paying for a lot of things by crippling investments in the life sciences is really the way to go,” Representative Scott Peters, Democrat of California, one of the three dodgers, told me on Tuesday. colleague Emily Cochrane. “Losing the investment in the pharmaceutical industry is too high a price to pay. “

Mr. Peters’ district in the San Diego area has tens of thousands of workers in medical research and drug development. Some could lose their jobs if pharmaceutical profits decline, investment in research shrinks, or businesses shut down. Mr Peters co-sponsored a competing drug pricing bill, which he said would better target inefficiencies and market failures. The budgetary effects of this legislation have not been measured - and the House committee did not vote on it on Wednesday - but it is similar to a Senate bill that was estimated to generate one-fifth as many savings.

Without the drug pricing provision, Democrats will struggle to fund their other priorities. They pass their bill using a special budget procedure to avoid Republican obstruction. But this process means their invoice must meet specified budget targets. If the money saved through drug price regulation is reduced, so too is the pot of money that can be spent on other purposes. Democrats have already abandoned plans for other income-generating policies, such as a wealth tax.

The United States pays higher prices for prescription drugs than any of its peers - about 250% of the price paid on average by other countries in the Organization for Economic Co-operation and Development, according to a recent RAND Corporation report. And those high costs spill over into the federal budget and the economy, pushing up insurance premiums and putting life-saving drugs out of the reach of some patients.

Democrats in Congress want to lower the prices of the drugs Medicare and other insurers pay, both to generate a way to pay for other things and also for the benefit of consumers and businesses in general.

But with falling drug prices comes tradeoffs. Pharmaceutical companies are built around assumptions of high margins in US markets, and early stage investors make choices based on their expectation that an effective drug will generate a big payoff. The Congressional Budget Office - the same non-partisan agency that told the House that such a policy could save the federal government a lot of money - recently released a report indicating that substantial reductions in drug prices would have corresponding negative effects. on the number of new drugs developed in the future. .

Of course, the pharmaceutical industry is not happy with the prospect of major price cuts. Steve Ubl, CEO of industrial trade group PhRMA, last week called the measure “existential” for his industry. He also said it was unfair that drug companies alone were being asked to shoulder the costs of such a massive expansion in healthcare. “We are being asked to pay a disproportionate share of the bill,” he said.

The pharmaceutical industry has spent years donating to political campaigns, lobbying members of Congress, and developing allies in business. They are now urgently taking advantage of these relationships. PhRMA on Wednesday announced a “seven-figure” ad buy and published an open letter in several Washington publications, in addition to television commercials aired on national news programs and football shows.

It’s a playbook that other powerful health lobbies have used. Groups representing doctors, hospitals and private equity firms launched a massive campaign in 2019 to defeat bipartisan legislation banning the practice of surprise medical billing. Their efforts ended the ban, although Congress eventually passed a more industry-friendly version a year later.

Senate leaders have indicated that they want to continue their own approach to drug price regulation. It remains to be seen whether their measure will differ in the fine print of policy or in the magnitude of the reduction in pharmaceutical benefits. But the House was generally seen as more aggressive on the issue. Its struggles this week could signal a smoother approach, and perhaps a smaller budget for Congress and other lofty White House goals.

Emily Cochrane and Alicia Parlapiano contributed reporting.