WASHINGTON (AP) - With patients facing more exposure to the cost of revolutionary new medications, the budget President Barack Obama released Monday reopened a debate on whether government should use its buying power to squeeze the pharmaceutical industry for lower prices.
WASHINGTON (AP) — With patients facing more exposure to the cost of revolutionary new medications, the budget President Barack Obama released Monday reopened a debate on whether government should use its buying power to squeeze the pharmaceutical industry for lower prices.
Obama called on Congress to allow the secretary of Health and Human Services to negotiate prices on behalf of Medicare beneficiaries for high-cost drugs and for biologics, which are medications derived from natural substances, ranging from insulin to some of the latest cancer treatments.
"The administration is deeply concerned with the rapidly growing prices of specialty and brand-name drugs," stated Obama's budget.
The move is politically significant because drug companies were allies in Obama's long struggle to pass his health care overhaul from 2009 to 2010. Fast forward to 2015, and it's insurance companies that are helping put the law's coverage expansion into place for consumers. Insurers have been loudly complaining about new drugs with eye-popping prices, such as Sovaldi, the $1,000-per-pill that can cure hepatitis C.
Unlike the U.S., governments in many other countries play a central role in determining drug prices. While the Veterans Affairs department and state Medicaid programs have legal authority to obtain steep discounts from drug makers, that doesn't include the largest payer, Medicare. When the Medicare prescription program was created, Congress expressly denied HHS the authority to negotiate prices.
Instead, that role is played by private insurers who deliver the prescription benefit to the more than 55 million Medicare beneficiaries. But when it comes to new drugs with no generic competitors, insurers have limited leverage. As a result such medications often wind up on coverage tiers that require patients themselves to pay a big share of the price.
It's unclear how hard the administration intends to push for Medicare negotiating authority. The budget line item did not specify a target for savings, and the pharmaceutical industry remains one of the most formidable lobbying outfits in Washington.
Some key players on the issue said the debate needs to go beyond Medicare. Matt Salo, executive director of the National Association of Medicaid Directors, said a comprehensive approach is needed to address high drug prices across insurance programs.
"If in this competitive market, Medicare is able to drop the floor on prices, what is the ripple effect?" asked Salo. "Does Medicaid get charged more?"
Obama's $1.1 trillion health care budget also called for:
— Increases, starting in 2019, in Medicare premiums for high-income beneficiaries, as well as additional charges for new enrollees. Those charges for new enrollees include a home health copayment, changes to the Part B deductible, and a premium surcharge for seniors who've also purchased a kind of supplemental insurance whose generous benefits are seen as encouraging overuse of Medicare services. Obama has proposed similar steps before, and many Republicans agree with the approach. But AARP, the seniors' lobby, is strongly opposed.
— A near-doubling of tobacco taxes, to extend health insurance for low-income children. The federal cigarette tax would rise from just under $1.01 per pack to about $1.95 per pack. Taxes on other tobacco products also would go up. That would provide financing to pay for the Children's Health Insurance Program through 2019. The federal-state program serves about 8 million children, and funding technically expires Sept. 30. The tobacco tax hike would take effect in 2016.