Analysis: Has Biden forgotten his plans regarding drug pricing?
June 1, 2021 | View PDF
President Joe Biden has laid out a long list of policy priorities - some more politically plausible than others. But what he left out of his sweeping infrastructure and family relief proposals – drug pricing reform, among other things – is as important as what he included.
Biden, who served in the U.S. Senate for 36 years and as vice president for eight more, understood the politics of coronavirus and was able to successfully shepherd his pandemic relief bill through Congress, with only Democrat votes. But that was easy, compared to his current push to get sweeping infrastructure and family relief aid packages through Congress.
His American Rescue Plan, which was billed as an emergency pandemic aid bill, focused on direct financial infusions to individuals and state and local governments along with funding for the vaccine rollout and other healthcare provisions.
The second plan, presented with a greatly enhanced definition of "infrastructure" and has not yet passed Congress, deals with physical infrastructure like roads, bridges, airports, and nontraditional infrastructure like broadband, elder care, climate change and electric vehicle funding.
Biden's third plan is focused on family issues and includes funding for tuition-free community college and pre-kindergarten, a vast expansion of family leave, and childcare programs. It would also extend the expanded child tax credit first passed in the pandemic funding bill. Lawmakers hope to get votes on these measures before the end of this year.
The coronavirus rescue was approved at a cost of $1.9 trillion. The American Families Plan is a $1.8 trillion proposal, including $1 trillion in new spending and $800 billion in tax credits. The American Jobs Plan, with the infrastructure and home health care proposals, is expected to cost $2.3 trillion.
To pay for these, Biden proposes to increase taxes on the wealthiest and highest-income Americans, increasing the marginal income tax rate for the top 1 percent of American income earners, to 39.6 percent from 37 percent. He would also increase capital gains and dividend tax rates for those earning more than $1 million a year. In addition, Biden proposes to raise the corporate tax rate from 21 percent to somewhere between 25 and 28 percent to pay for the infrastructure package.
But wait! What's not in the package?
While the proposals include a significant home health care benefit for some seniors, the only health care provision in Biden's American Families Plan is a $200 billion proposal for subsidies to those who purchase their own health insurance, intended to cut premium costs. What was left out of the infrastructure and families' proposals is perhaps more interesting.
Biden's plans do not include four key provisions he campaigned on:
The power to allow Medicare to negotiate for lower drug prices;
Lowering the Medicare eligibility age to 60;
His much-talked about public option for people to opt-in to government-oriented health coverage competing alongside private insurers;
Any drug-pricing legislation.
Biden officials say the White House continues to support and push for these campaign pledges. In a recent speech to Congress, he specifically urged Congress to lower drug prices now, but left it to lawmakers to figure the details. Proponents of direct Medicare price negotiations with drug companies say the change would not only cut costs for consumers, but also free up money for the federal government to pay for their coverage.
But Biden's failure to include drug price cuts and not change the law to allow Medicare to negotiate bulk price discounts left progressives shaken and disoriented at the administration's words-without-action.
To change drug pricing legislation, Congress must first eliminate a clause in the 2003 law that created Medicare's pharmacy benefit but specifically barred the government from interfering in price negotiations among drugmakers and insurers. Lawmakers included that clause, at the time, in order to get drug companies to buy in to the creation of Medicare Part D, giving seniors drug coverage. Congress has repeatedly failed to repeal the provision and give Medicare the power to negotiate for bulk drug price discounts. And this law was created well before $1,000 pills became commonplace.
In 2019, the Democratic-majority House approved H.R. 3, giving Medicare the power to negotiate for lower prices and requiring commercial plans to adopt the prices that Medicare negotiates. It passed the House, but the bill did not survive in the Republican-majority Senate.
But now with slight Democratic majorities in the House and Senate, Democrats believe they might be able to get the legislation to lower prices to pass, as part of Biden's package, or separately.
At the same time, Americans continue to pay as much as two to four times more for 20 brand-name drugs as people do in Australia, Canada and France, a recent study found. While the drug industry's successful race to develop vaccines has softened public pressure over its pricing practices, drug prices remain the highest-polling health care issue with significant support in both parties, even if lawmakers do not agree on solutions.
A vast majority of both Democrats and Republicans agree that it is time to address the high drug price issues. But they disagree on how far to push the drug industry for savings and have sharp ideological differences about what to do with the huge savings that would emerge if Medicare were able to negotiate for discounted prices and other reforms were implemented.
Biden's failure to include changing to allow Medicare to negotiate bulk discounts reveals just how difficult that might be to get through against the powerful pharmaceutical industry and strong Republican opposition.
While a toothless proposal to simply allow the HHS Secretary to negotiate drug prices might garner some support, it would not save the government any money. The White House knows its legislative proposals are already a heavy lift and adding the drug pricing to the mix might be another reason for reluctant members to peel off.
The bigger picture – Medicare for all vs ACA
The administration's failure to push for lowering the Medicare eligibility age to 60 or even as low as 55, as well as not including the drug pricing and the public option in its legislative proposals, reveals divisions within the Democratic ranks and reinforces tensions around a package that is already facing no shortage of it. Lowering the eligibility age to 60 could allow 23 million more people to qualify for Medicare and cutting that threshold to 55 years old, would make 42 million more people eligible.
Roughly 100 House and 18 Senate members, led by Rep. Pramila Jayapal, D-Wash., and Sen. Bernie Sanders, I-Vt., urged Biden in a letter to include the overhaul as part of his Families package. Most of those progressives support a "Medicare for All" insurance system, that Biden had opposed during the campaign. Biden's proposals to fortify and build on the Affordable Care Act, did get support of some of the more centrist members of the Democratic coalition.
But neither idea gets at the biggest need – the 2.2 million people in states that didn't expand Medicaid, who are still uninsured, and who don't qualify for ACA marketplace coverages because they earn too little or for Medicaid because they earn too much. Experts suggest lawmakers will find somewhere in the middle – expanding the ACA to include those Medicaid states, but many health policy analysts warn that Congress shouldn't be spending the drug price money before it's passed.
Republicans are not united in their point of view on many of these reform proposals. Many oppose most of the Biden packages, refreshing long-held deficit spending concerns that they completely ignored during the Trump administration. Others include a group of House Energy and Commerce Committee Republicans that have endorsed legislation that includes a series of reforms including a $3,100 out-of-pocket cost cap for seniors on Medicare Part D, aimed at lowering costs on Medicare and Medicaid. It would also provide a share of Part D rebates to be delivered to seniors at the point of sale, if approved.
Facing the drug industry
The drug industry will also be a huge barrier to any law getting passed. The Pharmaceutical Research and Manufacturers of America, known as Big Pharma, is not your average lobbying group. It is
considered to be one of the most skilled and powerful in Washington. In 2020, the pharmaceuticals and health products industry in the United States spent $306 million, compared to the second most – the insurance industry – which spend $151 million. What makes it so effective is that it can call on its members – pharmacies in every community in the U.S. – to put local pressure on local lawmakers. And Pharma's primary mission is clear: to preserve that provision prohibiting Medicare from negotiating for better prices.
The industry thwarted President Donald Trump's multi-pronged efforts to constrain its pricing power. Even though Trump came into office accusing drugmakers of "getting away with murder" and vowing he'd put a stop to it, the companies emerged from his term with just a few minor scrapes and cuts. However, many of Trump's efforts were more publicity stunt than substantive efforts.
Politics of getting stuff through
What is most likely to emerge, at least on the drug pricing front, is a bipartisan middle ground proposal, floated previously by Senate Finance Committee Chairman Wyden and his Republican counterpart, Sen. Chuck Grassley, R-Iowa. Their proposal, worked out last year between the lawmakers, would place an inflationary cap on Medicare drug prices and
restructure how the Part D program pays for drugs, saving what the Congressional Budget Office estimates is $94 billion over 10 years. Wyden suggests a new version of this plan might also include a provision to allow Medicare to negotiate drug prices, perhaps saving even more money. But Grassley urges Biden to lower his sights a bit. He opposes giving Medicare negotiating authority but supports requiring drug makers to pay rebates for price increases above the inflation rate.
But the real reason legislation to control drug prices stands the best shot of getting put back into the Biden proposals is because it could potentially raise substantial revenue to help pay for other priorities. Perhaps Biden has learned a valuable strategic lesson from his legislative past. By sidestepping the drug pricing issue, and deferring to Congress, Biden could avoid endorsing one faction over another while giving himself the flexibility to sign anything that Congress clears.
Also contributing to this column were the Washington Post, the New York Times, AP, Statnews.com,The Hill and KHN.