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Lawmakers have reached a deal on legislation lowering the price of prescription drugs. Included in President Biden’s social spending package, the legislation is set to:
- Allow medicare to negotiate (some) drug prices. While progressive Democrats pushed for the ability to negotiate up to 250 expensive drugs each year, the updated policy allows the negotiation of ten starting in 2025 and increases to 20 by 2028.
- Prevent drug companies from raising prices faster than inflation — last year, retail prices for 260+ brand-name drugs increased at more than double the general rate of inflation.
- Cap seniors’ out-of-pocket costs at $2,000 per year. For context, in 2019 more than 1.2 million older Americans incurred drug costs exceeding $2,000.
Of course, not everyone is celebrating. Progressive Democrats are upset over the compromises made to appeal to conservatives and pharmaceutical companies, who argue the deal too steeply caps potential reward and thus will hinder innovation and the development of new treatments.
Question is, who does that innovation truly serve? Many Americans argue that even the well insured can’t afford the innovative drugs the FDA approves. For example, Tafamidis was granted expedited approval to treat a rare disease that affects the heart and kidneys. It costs $225,000 a year to make and, at best, delays death by ~2 years. Other innovative drugs recently approved cost up to $1 million per patient — all of which raises premiums across insurance companies.
Pfizer’s CEO argues drug prices have been decreasing but patients aren’t seeing those savings because they’re eaten up by insurers and a “black hole of the federal budget to do other things.” While we don’t have data on his claims, a 2017 study showed that drug companies used 66% of their $116 billion in profit on research and innovation. As such, industry analysts recommend reducing spend on marketing, which would allow R&D investment to remain unaltered.
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Want to better understand the issues plaguing the American healthcare system? You can find an extensive list here, as well as (some) solutions in the works.
Resource Center:
- The Hill (Where we found this story) 17 days old | 5 minutes long
- Politico (Opinion) Cost of innovative drugs 1 month old | 9 minutes long
- Yahoo! News Pfizer CEO reacts 3 weeks old | 6 minutes long
- Washington Post 2017 study and concerns 16 days old | 10 minutes long
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I tried playing hide-and-seek from my insurance provider, but they found me in the ICU.
Art Credit: Joan G. Stark