Conservative and industry groups are trying to whip up opposition to President Biden’s massive social spending plan by warning it will imperil Medicare benefits, Axios has learned.
Why it matters: “Medicscare” is a well-worn political tactic precisely because it can be effective. For Democrats, there’s zero room for defections against the $3.5 trillion proposal if they want to pass the bill.
What’s happening: Senior citizens in Arizona, represented by Sen. Kyrsten Sinema (D-Ariz.), potential Democratic holdout, have started receiving large boxes labeled “Medical Shipment. Please open immediately.”
Inside, they find an empty prescription drug bottle and literature warning of Democratic plans to “ration Medicare Part D.” That’s a reference to a budget reconciliation bill provision that would allow the government to negotiate Medicare reimbursement rates for prescription drugs.
The mailers are the work of the Common Sense Leadership Fund, a Republican-aligned advocacy group. The mailers in Arizona specifically target Sen. Mark Kelly (D-Ariz.), who’s up for re-election next year.
CSLF spokesman Colin Reed told Axios the group is mailing the packages to seniors and unaffiliated voters in Arizona and New Hampshire, where the group is targeting Sen. Maggie Hassan (D-N.H.), who’s also up for re-election.
Another nonprofit advocacy group, A Healthy Future, is targeting the prescription drug portions of the bill in a digital ad campaign aimed at key Democratic votes.
The group has spent nearly $300,000 on Google, Facebook and Instagram ads aimed at Reps. Frank Pallone, Tom Malinowski and Andy Kim, all Democrats from New Jersey — where the drug industry has a huge economic footprint.
“This is a prescription for disaster,” its ads say. They urge calls to Congress to “oppose cutting Medicare to pay for the $3.5 trillion spending plan.”
It’s not clear who’s behind A Healthy Future — the group did not respond to inquiries from Axios — but its messaging on reconciliation and past policy fights track with drug industry priorities.
The big picture: Democrats have turned to drug pricing reforms to offset part of the legislation’s massive price tag, potentially paying for as much as $600 billion in new spending.
Yes, but: The Mediscare tactic is larger than just the drug pricing fight. Americans for Prosperity, the Koch-backed conservative advocacy group, is running its own ads warning of much larger impending Medicare cuts.
The pharmaceutical industry is on the verge of defeating a major Democratic proposal that would allow the federal government to negotiate drug prices.
Speaker Nancy Pelosi (D-Calif.) can afford only three defections when the House votes on a sweeping $3.5 trillion spending package, but Reps. Scott Peters (D-Calif.), Kurt Schrader (D-Ore.) and Kathleen Rice (D-N.Y.) last week voted to block the drug pricing bill from advancing out of the Energy and Commerce Committee. Rep. Stephanie Murphy (D-Fla.) voted against advancing the tax portion of the legislation in the House Ways and Means Committee.
All told, the number of House Democrats who have concerns about the drug pricing bill is in the double digits, and several Democrats in the 50-50 Senate would not vote for the measure in its current form, according to industry lobbyists.
The holdouts mark a sharp contrast to just two years ago, when every House Democrat voted for the same drug pricing bill, underscoring the inroads pharmaceutical manufacturers have made with the caucus on a measure that would narrow corporate profit margins.
“The House markups on health care demonstrate there are real concerns with Speaker Pelosi’s extreme drug pricing plan and those concerns are shared by thoughtful lawmakers on both sides of the aisle,” the Pharmaceutical Research and Manufacturers of America (PhRMA), the industry’s top trade group, said in a statement following the committee votes.
The reversal follows the industry’s multimillion-dollar ad campaigns opposing the bill, timely political donations and an extensive lobbying effort stressing drugmakers’ success in swiftly developing lifesaving COVID-19 vaccines.
The bill at the center of the fight, H.R. 3, would allow Medicare to negotiate the price of prescription drugs by tying them to the lower prices paid by other high-income countries. The measure is projected to free up around $700 billion through the money it saves on drug purchases — covering a big chunk of the Democrats’ $3.5 trillion spending plan.
Drugmakers say the measure would reduce innovation, pointing to a Congressional Budget Office estimate that found it would lead to nearly 60 fewer new drugs over the next three decades.
Peters and other Democrats have proposed an alternative bill that would limit price negotiation to a fraction of the prescription drugs included in H.R. 3, focusing instead on drugs like insulin, the diabetes treatment that has seen its price rise dramatically over the last decade. The alternative measure also would set a yearly out-of-pocket spending limit for lower-income Medicare recipients.
The proposal foreshadows a less aggressive drug pricing compromise that uneasy Senate Democrats are more likely to get behind.
“You’re going to see something pass, but it probably won’t be H.R. 3,” said a lobbyist who represents pharmaceutical companies.
Pharmaceutical manufacturers oppose any efforts to control the price of prescription drugs, but the alternative bill is more favorable to the industry than the broader Democratic bill.
“Any kind of artificial price controls will have an impact on both new scientific investment as well as access to medicines,” said Rich Masters, chief public affairs and advocacy officer at the Biotechnology Innovation Organization, a trade group that represents pharmaceutical giants such as Sanofi, Merck and Johnson & Johnson.
“We appreciate the focus on patient out of pocket costs, which we know is a critical component to any reform efforts and something that BIO and our member companies have long supported,” he added.
Progressive lawmakers, who have long bemoaned rising drug prices, blasted the three House Democrats who voted to block H.R. 3, saying they succumbed to industry donations and lobbying efforts.
“What the pharmaceutical industry has done, year after year, is pour huge amounts of money into lobbying and campaign contributions … the result is that they can raise their prices to any level they want,” Sen. Bernie Sanders (I-Vt.) said in a video message Friday.
The pharmaceutical industry spent $171 million on lobbying through the first half of the year, more than any other industry, to deploy nearly 1,500 lobbyists, according to money-in-politics watchdog OpenSecrets. That’s up from around $160 million at the same point last year, when the industry broke its own lobbying spending record.
Peters announced his opposition to Pelosi’s drug pricing proposal in May and shortly after was showered with donations from pharmaceutical industry executives and lobbyists, STAT News reported.
Peters is the No. 1 House recipient of pharmaceutical industry donations this year, bringing in $88,550 from pharmaceutical executives and PACs, according to OpenSecrets. Over his congressional career, Peters has received in excess of $860,000 from drugmakers, more than any other private industry.
The California Democrat told The Hill last week that accusations of his vote being guided by donations are “flat wrong” and noted that his San Diego congressional district employs roughly 27,000 pharmaceutical industry workers consisting mostly of researchers.
“It’s always going to be the attack because it’s simple and it’s easier than engaging on the merits,” he said.
Schrader received nearly $615,000 from the industry. He inherited a fortune from his grandfather, a former top executive at Pfizer, and had between $50,000 and $100,000 invested in Pfizer, in addition to other pharmaceutical holdings as of last year, according to his most recent annual financial disclosure.
Schrader tweeted last week that he is “committed to lowering prescription drug costs,” while arguing that the House bill would not pass the Senate in its current form.
Rep. Lou Correa (D-Calif.) another supporter of Peters’s more industry friendly bill, received an influx of pharmaceutical donations in recent months, including a $2,000 check from Pfizer’s PAC in mid-August, according to Federal Election Commission filings.
In meetings with lawmakers, lobbyists have argued that now is not the time to go after drugmakers, which developed highly effective COVID-19 vaccines and are developing booster shots and other treatments to fight the virus.
The U.S. Chamber of Commerce, which represents several major pharmaceutical manufacturers, said last month that Democratic drug pricing efforts will leave the U.S. “unprepared for the next public health crisis.”
PhRMA last week launched a seven-figure ad campaign to oppose H.R. 3. That’s after pharmaceutical groups and conservative organizations bankrolled by drugmakers spent $18 million on ads attacking the proposal through late August, according to an analysis from Patients for Affordable Drugs, a group that launched its own ads backing H.R. 3 last week.
The ad buys are meant to sway both lawmakers and the general public. A June Kaiser Family Foundation poll found that 90 percent of Americans approve of the drug pricing measure, but that support dropped to 32 percent when they were told that the proposal “could lead to less research and development of new drugs.”
This is a guest post by Taylor J. Christensen, M.D. (@taylorjayc). Dr. Christensen is an internal medicine physician and health policy researcher with a background in business strategy and health services research.
Since any mystery in the healthcare system intrigues me, I’ve been working on understanding pharmacy benefit managers (PBMs) lately.
Why did PBMs arise in the first place, and how did they come to have this somewhat strange role in the drug market? Let’s look at the evolution of PBMs, which I will categorize into three distinct phases.
Forewarning: There isn’t a lot of publicly available information on this stuff, so some of this is my best piecing together of things I’ve read plus supplemented by direct communications with people who work for insurers or PBMs.
Way back before PBMs, people used to pay for medications 100% up front out of pocket. They’d keep their receipts and then submit them all to their insurer later for partial reimbursement according to their insurance plan’s formulary.
That clearly had some downsides. If a patient couldn’t afford the full price up front, they would be stuck choosing which of their meds they’re not going to get, which is bad for both patients (nonadherence) and pharmacies (lost sales). Insurers also had to spend tons of time reconciling shoeboxes full of receipts.
If only there were a way to integrate an insurer’s formulary into the pharmacy’s computer system so that patients only pay their exact copay at the time they fill a prescription! Everyone would be a lot happier. Patients wouldn’t have to forego quite so many medications, pharmacies wouldn’t lose out on as many medication sales, and insurers wouldn’t have to deal with people sending in shoeboxes full of receipts. Win win win.
Enter the precursors to pharmacy benefit managers—they were essentially groups of software engineers tasked with working with pharmacies to get insurers’ formularies into the pharmacies’ computer systems. And they succeeded! After that, when a patient showed up to fill a prescription, the pharmacy would simply enter the patient’s insurance information into their system and the exact co-pay for that medicine would magically appear on the cash register’s screen. The patient paid their amount, and the transaction was then sent to the insurer to reimburse the rest.
But how did these precursor PBMs evolve into today’s PBMs that, among other things, “manage benefits”? My guess is that it went something like this . . .
These precursor PBMs got pretty good at integrating formularies into pharmacies’ systems, so they began to expand their customer base by helping lots of other insurers do the same thing.
Soon they became more familiar with all the complexities and intricacies of formularies than anyone else. And, as companies are wont to do, they leveraged that competency to make more money by offering a new service, which they maybe pitched to insurers like this:“Hey insurer, we already know all the details of your formulary. And we know where you could save money since formularies are kind of our thing. Why don’t you outsource your formulary-making efforts to us? We’ll make you a better formulary and charge less than it’s costing you to do it in-house right now. No-brainer, right?” And thus, not too long after their inception, PBMs officially started managing pharmacy benefits.
But that’s not where the story ends.
Phase 3 (dun dun dun)
Soon these PBMs found that they had amassed significant indirect control over which medicines patients get. Set a lower copay for a medicine and, sooner or later, more patients will end up taking it. And the one making the formulary is the one who sets the copays.
What did PBMs do with that power? They tried to leverage it to get better drug prices from manufacturers, which would allow them to offer an equivalent but cheaper formulary to their customers (insurers). But how, if they are not actually in the drug supply chain (that goes from drug manufacturers à drug wholesalers à pharmacies à patients) could they do that?
They cleverly reached out to the drug manufacturers directly and said something like this:“Hey drug manufacturer, we don’t actually have a direct financial relationship with you (yet). But we have significant control over how many sales you get because we set patients’ copays. How about we guarantee that your drug will, from now on, be the only one from its category in the lowest-copay tier? This will increase your sales quite a bit! And, in exchange for helping you get more sales, you can send us a “rebate” on every sale. So this is how it will work. We already keep track of every drug transaction, so every quarter we will send you the data to show how many patients using our formulary bought your drug, and you will send us a $10 rebate for each one.”
Contrary to popular belief, PBMs don’t keep all of this rebate money. Remember, their goal is to outbid other PBMs to offer the best formulary for the cheapest. And if the PBM market is competitive, they will have some degree of price competition that will force them to pass along some of those rebates on to their customers (insurers) in the form of lower fees.
I spoke with someone who works at an insurer and is in charge of contracting with their insurer’s PBM, and this person indicated that it is very possible for an insurer to get multiple bids from PBMs and identify which one is the best deal. Although, with the complexity involved, this process generally requires a specialist healthcare consultant who is an expert on navigating PBM contracts. I spoke with such a consultant, who had also worked for PBMs directly before becoming a consultant to insurers, and this person estimated that PBMs only keep about 20% of the rebates they receive from drug manufacturers. Other studies have been done on this topic, but attribution is tricky since PBMs are able to rename the monies they are receiving from drug manufacturers to fudge the numbers, which is probably why the Government Accountability Office reported in 2019 that PBMs only retain about 1% of rebates.
Well, there you have it. Phase 3 was the start of all the wheeling-dealing complexities that give PBMs their shady reputation.
I believe this is helpful background to have when you’re trying to improve the drug market (i.e., solve the problem of expensive drugs) because without understanding the incentives of the parties involved, you cannot get to the root of the problems with that system.
Why it matters:Democrats may be positioning themselves to push policy measures that assign value to drugs and then price them accordingly — a huge potential blow to the pharmaceutical industry.
To truly address its launch price, policymakers have to grapple with big questions the U.S. system currently avoids: How should we determine the value of a drug, and who gets to make that decision?
President Biden proposed giving an independent review board the power to determine the Medicare rate for new drugs that don’t have any competition.
Democrats’ most prominent drug legislation is a House bill that gives Medicare the power to negotiate drug prices.
Sen. Ron Wyden, the chairman of the Senate Finance Committee, recently called out Aduhelm by name in a document outlining the principles that will guide the Senate’s drug pricing bill, a hint that the Senate’s legislation will take a different direction than the House’s.
The bottom line:“Any kind of process for valuing new drugs like Aduhelm take you immediately into the controversial quagmire of how to quantify improvements in quality of life for people,” said KFF’s Larry Levitt.
UPDATE: May 21, 2021: Late Thursday, drug manufacturing giant Eli Lilly filed a motion in an Indiana district court to halt 340B-related monetary penalties, scant days after the Biden administration set a June 1 deadline for biopharmaceutical companies to comply with new conditions in the drug discount program and allow hospital contract pharmacies access to discounted drugs.
The suit alleges a Monday letter from Diana Espinosa, acting head of the Health Resources and Services Administration, gives “no legal explanation or justification for the arbitrary June 1 deadline.”
Lilly previously filed an almost identical lawsuit January 2020. The Indianapolis-based biopharma said it expected the government to follow the briefing schedule outlined in that suit before mandating compliance with 340B and forcing it to pay “substantial and irretrievable sums of money.”
“If the Court ultimately decides Lilly was required to extend 340B pricing to contract pharmacies, Lilly will comply with that decision. Conversely, if the Court ultimately decides manufacturers are not required to extend 340B pricing to contract pharmacies, then we surely expect the government will comply with that decision. But there is no explanation or justification for the government’s attempt to make Lilly pay now, other than to evade this Court’s review and leave Lilly without recourse for such payments,” the motion reads.
In the petition, Lilly, which brought in $6.2 billion in profit last year, alleges the shifting terms of the program are due to HHS director Xavier Becerra bending to political pressure to “take action” against drug manufacturers, as pharmaceutical prices continue to climb.
Lilly asked the district court to temporarily block HHS from moving against Lilly until the drugmaker’s request for a preliminary injunction is resolved; and for an accelerated legal schedule to settle its claims before the looming June deadline.
An HRSA spokesperson declined to comment on the suit.
HHS’ Health Resources and Services Administration called out six pharmaceutical companies Tuesday for violating rules under the 340B drug discount program, ordering them to repay affected providers for previous overcharges and warning of more penalties if they don’t comply.
In July 2020 some drugmakers stopped giving the 340B ceiling price on their products sold to covered entities and dispensed through contract pharmacies, while others limited sales by requiring specific data or selling products only after a covered entity demonstrated 340B compliance, according to HRSA.
In letters from Diana Espinosa, acting administrator of HRSA, the agency requested AstraZeneca, Eli Lilly, United Therapeutics, Sanofi, Novo Nordisk and Novartis give an update on their plans to restart selling covered outpatient drugs at the 340B price to covered entities that dispense medications through contract pharmacies by June 1.
Providers and drugmakers have sparred for years over the 340B drug discount program that requires pharmaceutical companies to give discounts on outpatient drugs for providers serving low-income communities.
AHA along with five other provider groups in December filed a federal lawsuit against HHS, alleging the department failed to enforce 340B program requirements and allowed actions from drug companies that undermined the program. That lawsuit was later dismissed.
But with the change in administrations, providers now seem to have an ally in the fight.
Previously, as California’s Attorney General, newly minted HHS chief Xavier Becerra led a group of states pushing the agency to force drugmakers to comply with the law late last year.
Provider groups cheered the move after raising the alarm last year that an increasing number of drug companies were refusing to offer discounts to such eligible hospitals.
“The denial of these discounts has damaged providers and patients and must stop. It is vital that these companies immediately begin to repay the millions of dollars owed to these providers,” 340B Health CEO Maureen Testoni said in a statement.
In separate letters to drugmakers, HRSA outlines complaints against them and their actions, ultimately saying their policies violated the statute and resulted in overcharges that need to be refunded. The companies must work to ensure all impacted entities are contacted and efforts are made to pursue mutually agreed upon refund arrangements, according to the letters.
Any additional violations will be subject to a $5,000 penalty for each instance of overcharging under the program’s Ceiling Price and Civil Monetary Penalties final rule.
The American Hospital Association also praised the agency in a release for “taking the decisive action we’ve called for against drug companies that skirt the law by limiting the distribution of certain 340B drugs through community pharmacies.”
Hospitals in the 340B program provide 60% of all uncompensated care in the U.S. and 75% of all hospital care to Medicaid patients, according to 340B Health.
Some countries have stockpiles. Others have nothing. Getting a vaccine means living in the right place — or knowing the right people.
A 16-year-old in Israel can get a vaccine.
So can a 16-year-old in Mississippi.
And an 18-year-old in Shanghai.
But a 70-year-old in Shanghai can’t get one. Older people are at high risk for severe illness from Covid-19. But Chinese officials have been reluctant to vaccinate seniors, citing a lack of clinical trial data. Neither can an 80-year-old in Kenya. Low vaccine supply in many countries means only health care employees and other frontline workers are eligible, not the elderly.
Nor a 90-year-old in South Korea. Koreans 75 and older are not eligible until April 1. Only health care workers and nursing-home residents and staff are currently being vaccinated. The government initially said it was awaiting assurances that the AstraZeneca vaccine was safe and effective for older groups.
Anyone in Haiti.
Anyone in Papua New Guinea.
Anyone in these 67 countries. These countries have not reported any vaccinations, according to Our World in Data. Official figures can be incomplete, but many countries are still awaiting their first doses.
It wasn’t supposed to be like this: Covax, the global vaccine-sharing initiative, was meant to prevent unequal access by negotiating vaccine deals on behalf of all participating nations. Richer nations would purchase doses through Covax, and poorer nations would receive them for free.
But rich nations quickly undermined the program by securing their own deals directly with pharmaceutical companies. In many countries, they have reserved enough doses to immunize their own multiple times over.
Anyone who can afford a smartphone or an internet connection in India and is over 60 can get one. Mostly wealthy Indians are being inoculated in New Delhi and Mumbai, hospitals have reported, since vaccine appointments typically require registering online. Less than half of India’s population has access to the internet, and even fewer own smartphones.
And anyone who can pay $13,000 and travel to the U.A.E. for three weeks and is 65 or older or can prove they have a health condition.
A member of Congress in the United States. Friends of the mayor of Manaus, Brazil. Lawmakers in Lebanon. A top-ranking military leader in Spain. The extended family of the deputy health minister in Peru. The security detail to the president of the Philippines. Government allies with access to a so-called “V.I.P. Immunization Clinic” in Argentina. Around the world, those with power and connections have often been first in line to receive the vaccine — or have cut the line altogether.
A smoker in Illinois can get one.But not a smoker in Georgia.
A diabetic in the United Kingdom can. A diabetic in Connecticut can’t.
Countries have prioritized different underlying health conditions, with the majority focusing on illnesses that may increase the risk of severe Covid-19. In the U.S., health issues granted higher priority differ from state to state, prompting some people to travel across state borders.
A pregnant woman in New York.Not a pregnant woman in Germany. Up to two close contacts of a pregnant woman in Germany. Pregnant women were barred from participating in clinical trials, prompting many countries to exclude them from vaccine priority groups. But some experts say the risks to pregnant women from Covid-19 are greater than any theoretical harm from the vaccines.
A grocery worker in Texas, no. A grocery worker in Oklahoma, yes.
Many areas aim to stop the virus by vaccinating those working in frontline jobs, like public transit and grocery stores. But who counts as essential depends on where you live.
A police officer in the U.K. A police officer in Kenya. A postal worker in California. A postal worker in North Carolina. A teacher in Belgium. A teacher in Campeche, Mexico. Other jobs have been prioritized because of politics: Mexico’s president made all teachers in the southern state of Campeche eligible in a possible bid to gain favor with the teacher’s union.
Medical staff at jails and prisons in Colombia. A correctional officer in Tennessee. A prisoner in Tennessee. A prisoner in Florida. The virus spread rapidly through prisons and jails, which often have crowded conditions and little protective equipment. But few places have prioritized inoculating inmates.
An undocumented farm worker in Southern California. A refugee living in a shelter in Germany. An undocumented immigrant in the United Kingdom. Britain has said that everyone in the country is eligible for the vaccine, regardless of their legal status.
A Palestinian in the West Bank without a work permit. Despite leading the world in per-capita vaccinations, Israel has so far not vaccinated most Palestinians, unless they have permits to work in Israel or settlements in the occupied West Bank.
An adult in Bogotá, Colombia. An adult in the Amazonian regions of Colombia that border Brazil. In most of Colombia, the vaccine is only available to health care workers and those over 80.
But the government made all adults in Leticia, Puerto Nariño, Mitú and Inírida eligible, hoping to prevent the variant first detected in Brazil from arriving in other areas. A police officer in Mexico City. A teacher in rural Mexico.The government of populist president Andrés Manuel López Obrador has prioritized vaccinating the poor and those in rural communities, despite the country’s worst outbreaks occurring in major cities.
Indigenous people living on official indigenous land in Brazil.
These 43 countries, mostly high income, are on pace to be done in a year. These 148 countries, mostly low income, are on pace to take until next year or even longer. Countries like the U.S. continue to stockpile tens of millions of vaccine doses, while others await their first shipments.
“The vaccine rollout has been inequitable, unfair, and dangerous in leaving so many countries without any vaccine doses at all,” said Gavin Yamey, director of Duke University’s Center for Policy Impact in Global Health.
“It’s a situation in which I, a 52-year-old white man who can work from home and has no pre-existing medical conditions, will be vaccinated far ahead of health workers or a high-risk person in a middle- or low-income country.”