Still trying to fix the donut hole
November 1, 2018
The formidable pharmaceutical industry wants to recoup the $11.8 billion hit it took earlier this year in Congress’s 2018 budget deal. The drugmakers rarely lose, able to use clout and pressure in every House and Senate district to get what they want. Now they are flexing their muscles and you can expect a relentless push to get back that money which essentially comes out of pharmaceutical industry profits.
When Congress approved that budget, the final deal required the drugmakers to shift billions of dollars in Medicare drug costs away from seniors and into drug companies. It required the pharmaceutical industry to cover more of the costs seniors incur when they fall into Medicare’s “donut hole,” the vortex seniors get into when their out-of-pocket drug costs go beyond roughly $3,750 and until they reach about $5,000, when insurance kicks back in. Seniors pay more for their drugs during that period.
Congress has been trying to eliminate the gap altogether, but has not succeeded completely.
The 2018 budget fight was a rare lobbying loss for the pharmaceutical industry, known as Big Pharma. Ever since then, the industry’s trade group, the Pharmaceutical Research and Manufacturers of America, has been lobbying aggressively on the issue. After failing to get Congress to reverse the hit in subsequent spending bills, the industry shifted its focus to bipartisan legislation combating the misuse of opioids and other addictive drugs legislation.
The opioids measure passed in the U.S. Senate by a 99 to 1 vote in October with only Sen. Mike Lee, R-Utah, voting against it. The House passed its version in June, amid alarming increases in drug overdose deaths, with the government estimating more than 72,000 of them last year averaging 175 deaths every day, according to the Centers for Disease Control.
Big Pharma lost an eleventh-hour bid to attach a $4 billion windfall to the opioids bill, which would have included changes to the Medicare program. They pushed to eliminate the multi-billion tab drug companies would absorb for Medicare’s donut hole and in exchange they were willing to accept a provision designed to stop brand-name drugmakers from blocking generic competitors.
PhRMA, the lobbying group for the drug industry, argued “combining that fix with a solution to prevent the looming $1,250 spike in our-of-pocket costs in the [donut] hole” will protect seniors – a message that’s being echoed by key Republicans. But to be clear, none of this had anything whatsoever to do with the opioid crisis. They justified its push for that money as simply a correction to a Congressional Budget Office error that put the industry on the hook for more money than lawmakers had intended.
Democrats ended up blocking the measure, taking advantage of the optics of a Big Pharma bailout that would force seniors to pay more for their health care, on a bill intended to help people fight the opioid epidemic, in an election year.
But PhRMA is planning to push to bring it back as a stand-alone bill later this year. Without specifying details of the upcoming proposal, a spokesman for PhRMA suggests the donut hole changes in this year’s budget deal threatens the program’s successful competitive structure and left seniors in the donut hole paying five times more than their insurers for coverage of brand drugs.
But how lawmakers will pay for such a huge cost remains in doubt. Among the ideas being floated to offset some of the costs of the Part D policy change included a watered-down version of the CREATES Act, pushed this year by Sens. Charles Grassley (R-Iowa) and Patrick Leahy (D-Vt.), which tries to even the playing field for generic drug developers who often run up against blockades from brand-name pharmaceutical companies seeking to keep their competition at bay.
The Act has unusually broad support on Capitol Hill, including liberal Sens. Dianne Feinstein, D-Calif., Richard Durbin, D-Ill., and conservatives like Ted Cruz, R-Tex. and Rand Paul, R-Ky. It also has support from a broad coalition of activists groups all over the political spectrum, from AARP and Public Citizen on the left to FreedomWorks and the Heritage Foundation on the right.
Yet the measure has never become law. PhRMA lobbyists told the Washington Post that CREATES wouldn’t affect many medicines – fewer than 45, they suggest, because it only applies to the small number of drugs that fall under the FDA’s safety protocols. Instead, lobbyists suggest that CREATES would be a “giveaway to trial lawyers” by adding a new private right of action that would increase lawsuits and drive up costs for patients and taxpayers.
Another potential proposal to restore the shift of billions of dollars in Medicare drug costs away from seniors and into drug companies would be to delay the Medicare Part D “cliff” that will increase the donut hole for seniors starting in 2020 by two years, rather than establishing a permanent fix.
Also contributing to this story were Modern Healthcare, Politico and the Washington Post.