On September 19, 2019, House Speaker Nancy Pelosi released the “Lower Drug Costs Now Act of 2019” (HR 3). Excessive drug pricing is a major factor obstructing access to life-saving treatment in the Global South—and right here in the U.S. where the high cost of medicines is a leading cause of anger among voters, who are demanding major corrective actions. While Health GAP is still analyzing the entire 101-page bill, here is our rapid assessment:
This bill challenges Big Pharma’s monopoly pricing abuses by giving some teeth to the newly granted direct negotiating power of Health and Human Services (HHS) to drive prices for some medicines both for Medicare and insured and private payers. Big Pharma carries out excessive pricing in the U.S. compared with other high-income countries because the U.S. does not have the price control mechanisms used by other countries. HR 3 would not implement such mechanisms but drug makers that refuse to negotiate newly defined fair prices would pay a “non-compliance fee” starting at 65% of gross U.S. sales of the medicines accelerating up to 95% following three quarters of non-compliance. The bill requires greater transparency to HHS concerning R&D and manufacturing costs and domestic and foreign sales information, although it does not require increased public transparency.
The second positive move combats unjustifiable drug price increases—more than two-and-a-half times higher than the general inflation rate on average. For the 8,000 drugs covered by Medicare, manufacturers that have raised prices by more than the rate of inflation since 2016 will either have to lower their prices to the true inflation rate or face a 100% retroactive inflation rebate back to the Treasury.
These proposals suffer from glaring omissions and loopholes that must be corrected.
The real solution to correcting the stranglehold Big Pharma enjoys is to challenge their government-granted monopoly power and take away exclusive rights when they are so systematically abused. Given the pre-dominate role of public funding of R&D in break-through medical discoveries and the licensing of government owned drug discoveries, the U.S. should already be getting a much better deal both for government payers and the public-at-large. But, in many instances, the best solution to excessive drug pricing is to promote robust generic competition through lawful, government-imposed licenses, where multiple producers can make medicines efficiently and sell them cheaply while still making a profit and while still providing some remuneration to the patent holder.
We have to make sure that prioritized R&D is paid for, but it is a terrible system that requires unconscionable payments through extortionate pricing, systematically excluding desperate people from access to the medicines they require. The neglect of a licensing option, such as that contained in HR 1046, the “Medicare Negotiation and Competitive Licensing Act of 2019,” is a glaring weakness in HR 3 and must be addressed by lawmakers. Instead of reaching near parity with bloated prices in other rich countries, Congress should aim for a much better deal.