NCHR Letter to Democratic Congressional Leadership on Drug Pricing Reform

July 26, 2022

The Honorable Chuck Schumer
Majority Leader
United States Senate
Washington, DC 20515

The Honorable Nancy Pelosi
Speaker of the House
United States House of Representatives
Washington, DC 20515

Dear Leader Schumer and Speaker Pelosi,

We write today on behalf of the National Center for Health Research (NCHR) to urge you to quickly pass a budget reconciliation bill that includes meaningful drug pricing reforms. NCHR is a nonprofit think tank that conducts, analyzes, and scrutinizes research on a range of health issues, focusing on evidence-based policymaking and ensuring medical products are safe and effective for patients and consumers. We work to provide health professionals, patients, consumers, and policy makers with information to help make the best decisions to promote public health. We do not accept funding from companies that make products that are the subject of our work, so we have no conflicts of interest.

We strongly support the provision in the proposed legislation which requires 10 high-cost prescription drugs to be negotiated under Medicare, with the number increasing by five per year, up to 20 drugs per year by 2029. In Medicare Part B alone, spending on the top 20 drug products accounted for 52% of the total drug spending in 2020.1 According to the Congressional Budget Office, this measure would yield $290 billion in deficit reduction over ten years.2

However, we are concerned with the exclusivity provisions that would block new drugs and biologics from negotiation for 7 years and 11 years, respectively. We understand the important investment in research and development of new drugs; however, research indicates that the price of a new drug is rarely related to the cost of developing it. A recent study published in JAMA demonstrated that launch prices for new drugs increased from $2,115 per year in 2008 to $180,007 per year in 2021.3  By 2020 and 2021, 47% of new drugs were initially priced over $150,000 per year.3 And yet, research indicates that these expensive new drugs are rarely found to be more effective than older drugs.4 Unfortunately, these prices continue to increase until the drugs face generic competition. Logically, the exclusivity provision would result in even higher launch prices, to compensate for limited returns in later years. We recommend this provision be removed in the final legislation, or at least revised to shorten the exclusivity period to four years for drugs and seven years for biologics as a way to reduce the number of years that Medicare is burdened by high launch prices. Additional policies are needed to limit high launch prices for new drugs; these may be inappropriate for the budget reconciliation process and should be included in future drug pricing legislation.

Additionally, we oppose delaying negotiation on biologic drugs when a biosimilar option is available or in an advanced stage of development. In 2020, Medicare spent $30.7 billion on originator drugs for which a biosimilar was available, soon to be available, or in development.1 This accounted for 14% of all Medicare spending for separately payable drugs in Part B and Part D.1 Therefore, we recommend that biologics with biosimilar competition be negotiated as a way to decrease Medicare spending.

Unfortunately, the price of drugs in the US is not consistent with their value to patients or to public health. Instead, prices reflect what the market will bear, which is heavily influenced by direct-to-consumer advertising and promotional activities aimed at physicians. For example, from 2008 through 2020, new drugs approved through accelerated approval had a median launch price of $168,344 per drug per year, compared to a median launch price of $12,912 for other new drugs approved during the same years.3 Under the current proposed legislation, these drugs would be shielded from negotiations for many years. It is unclear to us whether the exclusivity limitation would apply to older drugs that are more recently approved for new indications. For example, the cancer drug Keytruda was first approved in 2014 for advanced melanoma and has subsequently been approved for more than a dozen other cancers. It cost Medicare $3.5 billion in Part B spending in 2020, the highest of any drug.5 Although some of those indications occurred in the last 7 years, Keytruda should be included in price negotiations. Approval for new indications of older drugs does not require a major investment and therefore should qualify for Medicare price negotiations.

Almost one-third of Medicare beneficiaries live on yearly incomes of less than $18,000 per year, and yet in 2019, Medicare beneficiaries faced out-of-pocket costs for prescription drugs that totaled approximately 12% of their median income. This did not include the cost of insurance premiums or out-of-pocket costs for treating many acute or chronic illnesses.6 We therefore strongly support the current proposal to cap these expenses at $2,000 per year. A recent analysis found this provision would lower prescription drug prices by an average of $900 for eligible beneficiaries.7 This cap would protect beneficiaries with high yearly spending without substantially increasing the overall cost of Medicare. We strongly recommend its inclusion in any final drug pricing legislation.

We also support the proposal to fully cover vaccines for Medicare beneficiaries. As you know, COVID vaccines played a critical role in saving lives during the past 18 months.8 The Affordable Care Act requires private health insurers to cover all recommended vaccines as part of prevention services, but as of 2020, Part D plans required a copayment for recommended vaccines 87% of the time.9 It is crucial that the costs do not prevent older Americans from accessing lifesaving vaccines and we greatly appreciate your efforts to close this loophole in the reconciliation bill.

The provisions included in the reconciliation bill to combat high drug prices are a step in the right direction and we applaud all of your hard work. There is still much to be done to lower the launch prices of new drugs, promote pricing that accurately reflects the value of a prescription, and to instill competition into a highly controlled drug market. We urge you to seriously consider our recommendations as you proceed with the reconciliation package and finally lower the costs of prescription drugs for millions of Americans. Please contact Thomas Eagen (te@center4research.org) at NCHR with any questions.

 

Sincerely,

National Center for Health Research

 

Cc:

The Honorable Ron Wyden

Chairman

Senate Finance Committee

 

  1. Health Care Spending and the Medicare Program (2022). Medicare Payment Advisory Commission (MedPAC). https://www.medpac.gov/wp-content/uploads/2022/07/July22_MedPAC_DataBook_SEC.pdf
  2. Estimated Budgetary Effects of Subtitle I of Reconciliation Recommendations for Prescription Drug Legislation. (2022). Congressional Budget Office. https://www.cbo.gov/publication/58290
  3. Rome, B.N., Egilman, A.C., Kesselheim, A.S. (2022). Trends in Prescription Drug Launch Prices, 2008-2021. JAMA. ;327(21):2145–2147. doi:10.1001/jama.2022.5542
  4. Chow, R.D., Bradley, E.H., & Gross, C.P. (2022). Comparison of Cancer-Related Spending and Mortality Rates in the US vs 21 High-Income Countries. JAMA Health Forum. 3(5):e221229. doi:10.1001/jamahealthforum.2022.1229
  5. Medicare Part B Spending by Drug. Centers for Medicare & Medicaid Services. https://data.cms.gov/summary-statistics-on-use-and-payments/medicare-medicaid-spending-by-drug/medicare-part-b-spending-by-drug/data
  6. Ramachandran, R., Zhou, T., & Ross, J., (2022). Out-of-pocket drug costs for Medicare beneficiaries need to be reined in. STAT. https://www.statnews.com/2022/01/07/out-of-pocket-drug-costs-for-medicare-beneficiaries-need-to-be-reined-in/
  7. Gangopadhyaya, A., & Garrett, B. (2022). Capping Medicare Beneficiary Part D Spending at $2,000: Who would it help and how much. Urban Institute. https://www.urban.org/research/publication/capping-medicare-beneficiary-part-d-spending-2000-who-would-it-help-and-how
  8. Montañez, A., & Lewis, T. (2022). How to Compare COVID Deaths in Vaccinated and Unvaccinated People. Scientific American.  https://www.scientificamerican.com/article/how-to-compare-covid-deaths-for-vaccinated-and-unvaccinated-people/
  9. Medicare Part D Plans Continue to Require Cost Sharing for Vaccines. (2020). Avalere. https://avalere.com/insights/medicare-part-d-plans-continue-to-require-cost-sharing-for-vaccines