There seems to be a lot of speculation about both presidential candidate’s proposals to lower prescription drug prices. While Former Vice President Joe Biden has received more donations from PhRMA (Pharmaceutical Research and Manufacturers of America), experts in the drug industry doubt Joe Biden’s plans will successfully lower drug prices. Similar judgement is being placed on President Trump for his unfulfilled promises regarding lowering drug prices. Here is what we know.
The pharmaceuticals and health products industry has donated more than $5.9 million to Biden’s presidential campaign, according to OpenSecrets.org, a site run by the Center for Responsive Politics, which tracks political donations.
President Donald Trump has received less than $1.5 million in donations from the industry, based upon FEC figures up to September 21. This contrast in numbers has been questioned as an explanation of the widespread criticism of Trump’s approach to drug pricing.
Trump’s efforts to lower prices
Trump released an Executive Order (EO) on September 13 in an effort to lower drug prices under a “most favored nations” pricing scheme. Under the plan, Medicare would refuse to pay more for drugs than other developed nations, which generally pay less than the U.S. The measure covers Medicare Part B and Part D.
What do experts have to say on the matter?
Dr. Wayne Winegarden of the Pacific Research Institute, a free market think tank, told executive order could harm patients.
“There are many problems with President Trump’s most favored nation executive order. He fails to understand the drivers of the drug affordability problem, and his EO will harm patients, innovation, and could ironically increase overall healthcare spending. The EO fails to understand which patients are being harmed by high drug prices, and why. Remember, 90 percent of all drugs dispensed are low-cost generics. So fixing the drug affordability problem requires reforms that target those drugs driving the problem,” Winegarden said.
Marc Samuels, a former policy adviser to George W. Bush White House who also worked at the Pentagon Office of Health Affairs, agreed that Trump’s executive order missed the mark.“If the goal is to help patients, this rule fails,” Samuels said. “Tying prices to other countries does not translate to lower out of pocket costs outright, and cuts of this nature will translate to reduced R&D investment and fewer cures in the future.”
Prof. Marc-André Gagnon is based at the School of Public Policy and Administration at Ottawa’s Carleton University. He sees the prevalence of political donations from PhRMA companies as part of the problem. Gagnon pointed out that the pharmaceutical sector was the top lobbying industry in 2020, with spending of $156.6 million. He was also critical of large aspects of the industry.
“It is important to understand that political contributions do not necessarily aim at getting policymakers to implement specific policies or to preserve specific policies, or avoid the implementation of specific policies. It is more about imposing dominant shared narratives for policymakers across the aisle. Instead of regulatory capture, some prefer to call this this cultural capture, which is about dominating the entire intellectual environment in which officials make policy decisions, which means funding everything from PACs, think tanks, advertising, phony grassroots pressure groups,” said Gagnon.
“Basically, insurers and PBMs [pharmacy benefit managers] were able to negotiate confidential rebates while patients were still paying co-payments based on the official price of the drug before rebates,” he said.
“This policy forces insurers to transfer rebates to insurers and reduce their co-pays or deductibles. Note that this policy affects the revenues of health insurers but does not affect the revenues of drug companies.”
Pharmaceutical Research and Manufacturers of America (PhRMA) represents U.S. biopharmaceutical research companies. In a statement, they also highlighted the role played by PBMs.
“After discounts and rebates, prices for brand prescription medicines grew just 1.7%, on average, in 2019, slower than the rate of overall inflation for the third year in a row,” PhRMA said.
“But it often doesn’t feel that way for patients, because middlemen like pharmacy benefit managers (PBMs) and payers often don’t share the steep rebates and discounts they receive from manufacturers directly with patients at the pharmacy counter. That’s why we need policies that will realign and strengthen system incentives, like increasing PBM transparency with employers, sharing more of the $175 in rebates, discounts and other price concessions directly with patients and ending the practice of compensating PBMs and other entities in the supply chain based on a percentage of the price of a medicine. And when patients use manufacturer cost-sharing assistance to help pay for their medicines, plans should be required to count that assistance toward patients’ deductibles and out-of-pocket limits. These policies will help lower what patients pay at the pharmacy counter without threatening to reduce or delay access to lifesaving medicines,” said PhRMA.
What’s next for drug pricing?
“In spite of complaints from the industry that are more for the show to preserve their dominant narrative, the Trump reforms represent no real threat for drug companies,” said Gagnon. “The main issue would be to allow real negotiations for drugs under Medicare Part D. Biden or Trump might say they are in favor of negotiations, but none have proposed a sensible plan that would allow efficient negotiations.”
“At the moment, I do not see any real change in the long-term approach. It is likely that drug companies will remain the most important lobbyists, spending 50/50 on both sides of the aisle,” added Gagnon.
At this late stage in the campaign, it’s unlikely Trump will make up the gap in PhRMA donations, particularly given the industry’s criticisms. But it’s not at all clear that Biden will deliver the real change on drug pricing he’s promising.