Here's How Congress Is Helping Big Pharma Keep Drug Prices High

An Obama initiative to hold the line on spending has run into a lobbying buzzsaw.
An Obama administration initiative seeks to change how Medicare pays for cancer therapies and other medications that phy
An Obama administration initiative seeks to change how Medicare pays for cancer therapies and other medications that physicians administer directly to patients in their offices or other outpatient settings. But Congress isn't fully on board.

If you want to know why it’s so hard to fight the pharmaceutical industry and reduce spending on prescription drugs, pay close attention to a new Obama administration initiative and the reaction it’s getting on Capitol Hill -- even from would-be allies in the Democratic Party.

The initiative seeks to change how Medicare pays for cancer therapies and other medications that physicians administer directly to patients in their offices or other outpatient settings. Under the current arrangement, Medicare basically reimburses doctors for the price of these drugs and then adds on an extra fee.

But that markup is based on what pharmaceutical companies say they charge for the drugs. Research has shown this arrangement gives doctors incentives to prescribe more expensive medications, even when less expensive ones would do the job -- thereby driving up bills for patients, who face bigger out-of-pocket costs, and eventually the public at large, which ends up owing more taxes to pay for the Medicare program.

It’s one reason that spending on these drugs is now around $20 billion a year, according to official government statistics.

The Medicare Payment Advisory Commission, a nonpartisan group of experts who advise Congress, has warned about these problems and urged the government to change the formula. In March, the Obama administration did just that. Specifically, it proposed a regulation that would reduce the markup on those drugs and convert part of it to a flat fee, thereby reducing incentives for doctors to order more expensive therapies.

The administration initiative would also experiment with other ways of paying for these medications.

The proposal is part of a broader effort to change the way public insurance programs reimburse providers and suppliers of medical care. The hope is that the programs will reward quality without encouraging excessive spending. The authority to attempt the reform comes from the Affordable Care Act, and the specifics of the initiative mirror a 2015 proposal from the Center for American Progress, an influential liberal think tank. But the effort to reduce incentives for prescribing expensive drugs dates back to the administration of George W. Bush and has drawn support from conservatives over the years.

“We need to take the financial incentives out of decisions to prescribe Part B drugs,” Ezekiel Emanuel, a physician and former Obama White House adviser, told The Huffington Post. “Decisions should be made on a therapeutic basis and not how much doctors are being reimbursed for the drugs.”

Not everybody agrees, however. The administration’s proposal has provoked intense opposition from the pharmaceutical industry and other physician groups, such as oncologists, for whom the existing system is extremely lucrative. They insist the proposed changes could disrupt the medication supply for cancer patients and other people in need of life-saving medication -- arguments that some patient organizations have also made.

The proposal still has support from an array of prominent consumer advocates and physician groups -- among them, AARP, the Medicare Rights Center, and the American Academy of Family Physicians. But the administration on Thursday received a pair of letters that show how strong the opposition has become.

One missive came from Republicans on the Senate Finance Committee. It called on the Centers for Medicare and Medicaid Services, or CMS, to withdraw the proposal because, the Republicans said, the administration’s proposal could actually “decrease the quality of beneficiary care and increase Medicare costs.”

The other letter, from Democrats on Finance, was less extreme. It expressed “concerns,” not “strong concerns,” and merely asked questions about specifics of the proposal rather than calling for the administration to cancel it altogether. But the questions the Democrats raised echoed arguments that industry lobbyists have made and the letter pointedly warned CMS not to proceed with finalizing the rule until it has addressed those questions.

Maybe the best illustration of the significance of the Senate Democrats' letter is the signatures of two senators in particular: Bill Nelson of Florida and Mark Warner of Virginia. Just four months ago, Nelson and Warner had signed on to another letter touting this very same payment initiative as a possible way to bring prescription drug spending under control. (A Warner spokesperson assured The Huffington Post that the senator “remains strongly supportive of the goal of reducing Part B drug prices.”)

The Senate letters closely resembled a pair of letters CMS received earlier in the week from Republicans and Democrats in the House. As HuffPost's Ryan Grim and Jeffrey Young reported at the time, House Minority Leader Nancy Pelosi (D-Calif.) had actually urged her members to compose the correspondence -- most likely, in an effort to stop them from signing the House GOP letter and creating a united, bipartisan front against the regulation.

But if Democrats are raising concerns about the initiative, it means they’re not out there defending it. And while the administration doesn’t need congressional assent to finalize the regulation, the lack of support even from Democrats on Capitol Hill means that it will be easier for opponents to undermine or eliminate the reforms — say, by attaching amendments to other pieces of legislation, or using hearings and letters to pressure administration officials into backing off.

Already, one Republican congressman, Rep. Larry Bucshon of Indiana, has told The Hill newspaper that he will introduce legislation to repeal the reform -- and that he expects support from at least some Democrats. Given the Democratic anxiety that motivated this week’s letters, he could be right.



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