June 21, 2016 at 5:00 am ET
Just days before President Obama endorsed Hillary Clinton for president, the Clinton campaign announced her support for a controversial Obama administration proposal that could dramatically change seniors’ ability to obtain lifesaving drugs.
The Centers for Medicare and Medicaid Services (CMS) recently proposed to experiment with the payment model for Medicare Part B that covers prescription drugs administered in a physician’s office to seniors, such as cancer medications and arthritis treatments. According to CMS, the purpose of this experiment is to test whether changing the way that Medicare reimburses physicians for these drugs affects physician and patient incentives and steers patients to drugs that are more effective or of better value.
The administration’s proposal is a response to the issue of high drug prices that has been in the news and a frequent topic on the 2016 presidential campaign trail. While it’s understandable that the administration would want to tackle this hot issue, its proposal depends more on potentially harmful government intervention than practical and sustainable solutions that will benefit patients and taxpayers.
If the Medicare Part B proposal is implemented nationwide, it could limit patients’ access to the drugs they need. Rural areas, in particular, would be impacted. Independent physicians are not backed by a major health system in many rural areas and, as a result, are unable to negotiate for the same discounts on drug prices as physicians in larger systems. Because the proposal would reduce the reimbursement that Medicare pays for some drugs, rural doctors could end up paying more for a drug than the Medicare reimbursement payment would cover, discouraging the drugs’ use.
Just as troubling as the CMS proposal is a push by the Campaign for Sustainable Rx Pricing (CSRxP), a coalition of health insurance companies and other health payers, health care providers, and consumers.
The group proposes that drug manufacturers disclose the price they intend to charge as part of the Food and Drug Administration approval process – and then require companies to report any drug pricing changes to the government. To be clear, the efficacy and safety of a drug – not its price – are the responsibility of the FDA. If the FDA believes a new and potentially lifesaving drug to be too expensive, will it deny approval and thereby deny Americans access to an available cure?
CSRxP also proposes that manufacturers perform comparison studies to ensure their drug is superior to existing drugs on the market. Superficially, this sounds like a decent idea. However, it already takes drug manufacturers years to bring a drug to market at an average cost of some $2.6 billion per drug, much of which is passed on to consumers in higher drug prices.
Many patients and their families already must wait an unbearable amount of time for new treatments to become available. We shouldn’t impose additional layers of testing that would increase the expense and lengthen the time it takes to bring drugs to market. Furthermore, such comparison studies would report only average effectiveness and offer little insight into treating individual patients with unique needs and circumstances.
The bottom line is, if we are to effectively address the issue of drug pricing, we need to adopt reforms that encourage competition among medications – competition lowers prices and spurs innovation as drug suppliers compete for valuable market share. Greater government intervention and arbitrarily capping drug prices paid by Medicare will have the opposite result; such measures will increase costs for consumers with private insurance coverage as the burden is placed more heavily on them. Increasing the heavy hand of government would also mean drug shortages in certain markets and reduced incentives for drug companies to take a risk on the next breakthrough medication.
Let’s hope that, if Secretary Clinton wins the presidency, she supports practical and efficient reforms that balance incentives to innovate with the fostering of competition and lower prices. Otherwise, the proposals percolating at CMS and from CSRxP, and others like them, will limit the ability of patients to get the medications they desperately need.
Joanna Shepherd is a Professor of Law at Emory University School of Law and the author of several studies examining the impact of government price controls on drug prices.