By Tami Luhby, CNN
When Senate Democrats crafted their legislation to lower drug prices, they wanted two main measures to encompass both the private insurance and Medicare markets.
However, in the end, they were forced to limit the provisions — restricting the growth of drug prices to inflation and placing a $35 cap on insulin prices — to Medicare only to enable their health care and climate package to be approved through reconciliation, which needs only a simple majority vote.
The chamber’s parliamentarian decided that extending the measures to the private market was not compliant with the rules of reconciliation. So the Senate passed the bill without including private insurance on Sunday, and the House is expected to take up the legislation later this week.
The private market in the US is enormous but fragmented among many insurers. More than 150 million Americans and their families have commercial coverage through employers, and more than 14.5 million people have Affordable Care Act policies.
Medicare also has a lot of heft, with more than 64 million senior citizens and people with disabilities enrolled, and has long influenced the nation’s health care system.
Little impact on the private market
The bill’s narrower focus is not expected to hurt the private insurance market and could even help restrain drug price increases in the future, health policy experts said.
“I don’t think we have any reason to believe that the policies that will change in Medicare are going to raise prices outside of Medicare,” said Dr. Benjamin Rome, a health policy researcher at Brigham and Women’s Hospital and Harvard Medical School.
In its review of a 2019 Senate Finance Committee bill that would have included an inflation cap only in Medicare, the Congressional Budget Office said the provision would also reduce the cost of drug benefits paid by private insurance plans. The savings, however, were more modest than the CBO had estimated for legislation that would have included the private market, said Loren Adler, associate director of the USC-Brookings Schaeffer Initiative for Health Policy.
The inflation cap and Medicare’s ability to negotiate the prices of certain drugs, another one of the bill’s provisions, would make the prices Medicare pays more transparent, said Rena Conti, a health economist at Boston University’s Questrom School of Business.
This could give pharmacy benefit managers, which negotiate with drug companies on behalf of insurers, Medicare drug plans, large employers and other payers, an even stronger hand in bargaining for their private-sector clients, she said.
Also, the cost of Part B drugs, which are expensive medications administered by doctors, are based on the same average sales prices paid by commercial insurers. So the inflation cap in Medicare could dampen manufacturers’ price hikes for the private market as well, Rome said.
However, the price of Part D medications bought at the pharmacy are established using different base prices, so the cap may not have as much of an impact on what private market insurers pay.
Including the private market in the legislation would have provided additional protection against bad behavior by drug manufacturers, giving them less leverage to raise prices outside of Medicare, Conti said. Also, it would have guaranteed that insurers pass the savings they receive from drugmakers onto their policyholders.
Still, some employer advocates are worried that the legislation could mean higher drug prices for companies and their workers since the private market was excluded from the inflation cap provision.
The legislation would disrupt drugmakers’ Medicare business model and could prompt them to shift costs to employers, said Alan Gilbert, vice president for policy at the Purchaser Business Group on Health, which represents 40 private companies and public entities that buy health coverage for more than 21 million Americans.
“It’s like a balloon,” said Gilbert. “You squeeze one end and it bulges out the other. That is a very real concern of ours.”
Another group that could be negatively affected are children and non-elderly adults who use expensive medications that don’t have a lot of competition, Conti said. Drugmakers may try to raise the prices of their prescriptions or set higher launch prices on medications targeted at these populations since they would not benefit from Medicare’s leverage. However, this applies to a relatively small group of drugs and Americans, she said.
The Pharmaceutical Research and Manufacturers of America, known as PhRMA, said lawmakers did not look out for patients.
“The sad reality is there is almost nothing in this bill that helps patients in the commercial market who are struggling to afford their medicines,” said Brian Newell, PhRMA spokesperson.
Limiting the $35 cap on the price of insulin only to Medicare enrollees is not that consequential, experts said. While the cost of insulin has skyrocketed over the years, many people with private insurance already pay no more than that amount.
About a fifth of those who take insulin and have health coverage through large employers pay more than $35 a month for the medication, according to an analysis from the Kaiser Family Foundation. More than a quarter of people with Affordable Care Act policies and nearly one-third of those insured through a small employer pay more than that threshold.
Some private insurers and states are taking action to help Americans afford the drug. UnitedHealthcare will eliminate out-of-pocket costs for insulin for certain policyholders starting next year, while 20 states have placed caps on copayments. Also, two drugmakers are working on inexpensive versions of the medication, while some other manufacturers are offering deep discounts for certain patients.
“Bottom line is I don’t think stripping it out will have a major impact on the private sector,” Gerard Anderson, a professor of health policy and management at Johns Hopkins University, said of the insulin cap.
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