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Congress Likely to Take Only Small Steps on Drug Prices

By Kerry Young, CQ Roll Call

October 5, 2016 -- Federal lawmakers will continue to rail against the high cost of prescription drugs in the next few years, but their most likely actions will be limited to relatively small steps such as the enactment of measures intended to approve more generics.

"There is not going to be a magic bullet," said Douglas Holtz-Eakin, a former director of the Congressional Budget Office (CBO) who now leads the conservative American Action Forum. "There are a bunch of little levers they can pull."

Net spending on prescription medicines in the United States rose by 8.5 percent last year to $309.5 billion from the previous year and could hit as much as $400 billion by 2020, according to consulting firm IMS Health.  

One of the most promising bills addressing drug costs might save the federal government $3 billion over a decade, a fraction of those national costs. This measure (S 2019) by Sen. Amy Klobuchar, D-Minn., and Sen. Charles E. Grassley, R-Iowa, would direct the Federal Trade Commission to intervene when makers of branded drugs pay other companies to delay generic competition for their products. Similar bills dating from 2005 have called for the Federal Trade Commission to actively pursue these cases. 

What could propel lawmakers to act next year is a need for budget offsets at a time when Congress faces deadlines on significant health legislation, Klobuchar said. Next year, lawmakers will need to reauthorize the Children's Health Insurance Program and user fees for the Food and Drug Administration. A version of Klobuchar's bill could be tucked into one of those measures. The same could be true for a bipartisan bill (S 3056) from Sen. Patrick J. Leahy, D-Vt., that seeks to remove obstacles to the introduction of generic drugs. CBO has estimated that it, too, could save about $3 billion over a decade.

"I do think we have the best chance ever in the coming year" for enacting legislation on generic medicines, said Klobuchar, who also cosponsored Leahy's bill.

So far, lawmakers have done little on the issue of drug costs beyond echo consumers' concerns, particularly about spikes in the prices of older medicines. They held hearings on Turing Pharmaceutical's decision to raise the price of a pill used to fight infections in people such as AIDS patients to $750 from $13 and the $600 tab for two-shot EpiPen packages. Both treatments involve decades-old drugs.

The prices of other drugs such as insulin could give lawmakers further ammunition, said Topher Spiro, vice president for health policy for the liberal Center for American Progress. The mean price of insulin rose from $4.34 per milliliter in 2002 to $12.92 in 2013, according to research published in the Journal of the American Medical Association in April. Insulin has been available since 1923, first as a product derived from animal pancreases and since the 1980s as a biotech product. 

"There will be another EpiPen-like episode," Spiro said. "The conditions are ripe for reform. You have got public outrage at its peak."

The question remains what Congress will do to respond to this anger. The influential Medicare Payment Advisory Commission will on Thursday and Friday discuss options that could cool the rising growth of pharmaceutical costs for the giant federal health program. Medicare's annual pharmacy bill already tops $100 billion. The advisers are slated to consider, for example, ways to increase use of cheaper copycat versions of costly biotech drugs.

Saying No

Lawmakers in Washington could face pressure to act on pharmaceutical costs if Californians in November approve a ballot initiative on drug pricing. It calls for using the generally lower federal Department of Veteran Affairs prices as a benchmark for health programs funded in part by the state such as Medicaid, which serves low-income people. The Los Angeles Times last month reported that two-thirds of registered voters who were polled said they support the measure. Yet ballot initiatives often face steep odds. This one is opposed by influential veterans' groups, who argue that the plan could raise prices for the VA. 

The VA's lower drug costs remain a model for many seeking to lower Medicare's pharmaceutical spending. A 2015 analysis co-authored by the advocacy group Public Citizen said Medicare's Part D pharmacy plans could save $16 billion a year if they secured the same discounts as the VA.

But health policy analysts note that Congress is unlikely to give the Medicare program the same key tool--a formulary list- that VA uses to lower its drug costs. The VA can decline to cover certain drugs in an effort to drive better bargains. CBO has said savings would be negligible if Medicare were directed to negotiate drug prices unless Medicare officials used tools that insurers use, such as threatening to exclude drugs from coverage.

Lawmakers are unlikely to allow Medicare to exclude drugs from coverage nationwide. Republicans favor sticking with the original design of the Part D drug program, which allows individual insurers that run the drug plans to use their own fairly generous formularies to bargain for lower prices. Individual insurers have less leverage than the entire Medicare program. Five of seven current Democratic-supported bills allowing Medicare to negotiate on drug prices specifically rule out the creation of a formulary (S 2023 and companion HR 3513; S 31 and companion HR 3061; and HR 4207). Some Democrats have considered trying to use arbitration in Part D bargaining, although it's not clear how well that would work.

It would be a "political poison pill" for lawmakers to limit which medicines senior citizens can take, said Joseph Antos, a researcher with the American Enterprise Institute and former Department of Health and Human Services official.

"If you can't say no, then you effectively can't force the price down," Antos said. "You have to be able to say no and Congress is great at trying to get someone else to say no."


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