Why Can T Medicare Negotiate Drug Prices?
— and tried to get him to agree to a public hearing on the issue. In the end, the two sides hashed out a compromise: one public hearing with a wider focus — the role of middlemen in the health care system — and the promise of a separate hearing on drug prices later.
The Senate Finance Committee held that hearing in December. Its conclusion: The middlemen are part of the problem, but drug prices are too.
“We need a more level playing field on drug prices,” said Sen. Ron Wyden of Oregon, the top Democrat on the panel. “The middlemen are not working for the consumer or taxpayer.”
The industry says the middlemen are needed to make sure companies get paid, and that they provide benefits to consumers. After all, they say, if the middlemen weren't doing their jobs, the drug companies would have to do it themselves.
Insurers and pharmacy benefit managers argue that drug companies set prices too high, and that they're making money hand over fist. They say the high prices help explain why health care spending is so high.
“It's not because of us,” said J.C. Scott, president of the Pharmaceutical Care Management Association, a trade group for the middlemen.
The middlemen say they keep costs down in various ways, like securing discounts from drug companies and steering patients to lower-cost drugs. The drug companies, for their part, say they're doing their part. Robert Zirkelbach, a spokesman for the Pharmaceutical Research and Manufacturers of America, said the industry is working to make drugs more affordable through research and development.
Zirkelbach said drug companies set their prices based on the value of the medicines to patients and the value to society of innovation.
“The pharmaceutical industry is committed to working with policymakers to ensure they have the data they need to make informed decisions about how to contain and reduce the cost of health care,” he said.
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Drug prices have been a political hot potato for decades, but the issue really came into focus in 2014, when Martin Shkreli, the founder and CEO of Turing Pharmaceuticals, bought the rights to a decades-old drug and immediately jacked up the price from $13.50 to $750 per pill.
The price hike sparked outrage — and turned Shkreli into a national villain.
“Martin Shkreli is the poster boy for everything that's wrong in the drug industry,” said John Rother, president of the National Coalition on Health Care, a consumer group that advocates for affordable health care.
Rother said the middlemen share Shkreli's DNA.
“They're all playing the same game,” he said.
The middlemen, which include drug distributors, benefit managers and pharmacy benefit managers, serve two distinct roles.
Pharmacy benefit managers act as middlemen between the drug companies and insurers. They negotiate rebates and other payments from drug companies and get a cut of those payments. Not all drugs have rebates, but some do. For example, PBM Express Scripts, one of the largest in the country, gets rebates on 50 percent of the drugs its members use, a spokesman said.
The pharmacy benefit managers' critics say the middlemen should share more of those rebates with insurers and ultimately consumers.
But the pharmacy benefit managers say they're doing the consumer a favor. For example, they say, they steer patients to less expensive, sometimes generic versions of drugs.
The benefit managers also say they save insurers money by helping them predict which drugs their members will use. That means insurers can avoid carrying drugs they know their members won't need, saving the insurers money.
Insurers, for their part, have a different sort of middleman — drug distributors. Those middlemen buy the drugs from the drug companies and deliver them to pharmacies and hospitals.
The drug distributors' role has been under scrutiny since last year, when lawmakers found that they, too, were getting rebates from drug companies. The drug companies had to turn over those rebates because of a 2008 law that made drug rebates public information.
The drug distributors say the rebates help them give drug companies the best prices for their products, and pass those savings to drug stores and hospitals.
“There is a lot of internal competition between the wholesalers — and that's why there are discounts,” said Mark Merritt, president of the drug distributor trade group, Pharmaceutical Care Management Association.
The drug companies say they, too, are playing by the rules.
PhRMA, the trade group representing the drugmakers, said the middlemen aren't the problem.
“Policymakers should look upstream in the supply chain to address the drivers of high drug costs,” Zirkelbach, the trade group spokesman, said in a statement.
He pointed out that U.S. drug prices are lower than in most European countries and Canada.
Drug companies say they need to make profits to fund their research and development, and that they're doing just that. The drug companies argue they also help consumers by bringing innovative new medicines to market.
“This is not about making money,” Merck CEO Kenneth Frazier said at a recent meeting with President Donald Trump. “It's about curing diseases.”
PhRMA says its drugs save the federal government $89 billion in health care costs.
But the industry's critics say the drugmakers could do more to bring down prices, especially by giving up some of the protections they have from competition.
The drug companies say they're doing their part by making a series of voluntary