Telemedicine is supposed to make consumers’ lives easier, right? One of us had the opposite experience when managing a sick kid this week. My 14-year-old has been sick with a bad respiratory illness for over a week. We saw her pediatrician in-person, testing negative for COVID (multiple times), flu, and strep. Over the week, her symptoms worsened, and rather than haul her back to the doctor, we decided to give our health plan’s telemedicine service a try. To the plan’s credit, the video visit was easy to schedule, and we were connected to a doctor within minutes. He agreed that symptoms and timeline warranted an antibiotic, and said he was sending the prescription to our pharmacy as we wrapped up the call.
Here’s where the challenges began. We went to our usual CVS a few hours later, and they had no record of the prescription. (Note to telemedicine users: write down the name of your provider. The pharmacy asked to search for the script by the doctor’s name, which I didn’t remember—and holding up the line of a dozen other customers to fumble with the app seemed like the wrong call.)
We left and contacted the telemedicine service to see if the prescription had been transmitted, and after a half hour on hold, were finally transferred to pharmacy support. It turns out that the telemedicine service transmits their prescriptions via “e-fax”, so it was difficult to confirm if the pharmacy had received it. Not to be confused with e-prescribing, e-fax is literally an emailed image of a prescription, with none of the safeguards and communication capabilities of true electronic prescribing.
The helpful service representative kindly offered to call the pharmacy and placed us on hold—only to get a message that the pharmacy was closed for lunch and not accepting calls! Several hours later, which included being on hold for 75 minutes (!!!) with our CVS, my daughter finally got her medication.
Despite the slick app and teleconferencing system, the operations behind the virtual visit still relied on the very analog processes of phone trees and faxes—which created a level of irritation that rivaled trying to land Taylor Swift tickets for the same kid. It was a stark reminder of how far healthcare has to go to deliver a truly digital, consumer-centered experience.
A recent STAT News article highlights a concerning new trend in direct-to-consumer pharmaceutical marketing, enabled by access to virtual care. Pitched as a tool for patient empowerment, pharmaceutical companies are now offering consumers immediate treatment for a variety of health conditions at the click of a button that says, “Talk to a doctor now.”
Over 90 percent of eligible patients receive a prescription for the drug they “clicked” on, after connecting with a virtual care provider on a third-party telehealth platform. Not only does this practice give drug companies direct access to prospective patients, but it also delivers lucrative data on patient age, zip code, and medication history that can be used to target marketing efforts.
The Gist: Articles like this remind us why the US is one of only two countries in the world that allows direct-to-consumer marketing of prescription drugs (the other, interestingly, is New Zealand).
As the number of Americans with a primary care provider continues to decline, this kind of Amazon-style, easy-button drug shopping experience will be increasingly appealing to many consumers. But wherever innovation outpaces regulation, situations in which for-profit companies prioritize profits over providing the best care for patients are sure to occur.
While we support the idea of greater consumer empowerment in healthcare, we worry that this highly fragmented approach to consumer-driven health can result in abuse and patient harm.
In a unanimous decision, the Justices found that the Department of Health and Human Services (HHS) exceeded its legal authority when it cut Medicare reimbursement rates for outpatient drugs by 28.5 percent at 340B-eligible hospitals in 2018. The justices wrote that the Centers for Medicare and Medicaid Services (CMS) shouldn’t have cut payments to these hospitals without first surveying their average drug acquisition costs, as required by statute.
CMS must now figure out how to repay 340B hospitals the difference in reimbursement for 2018 and 2019, the two years the unlawful cuts were in effect, during which time it redistributed those savings to all hospitals in the form of higher reimbursement for outpatient services. (For an explainer on the mechanics of the 340B program, see our overview here, and for more details on this Supreme Court case, see our summary here.)
The Gist: This decision was a narrow ruling on administrative grounds, and did not touch on the larger policy debates concerning the 340B program. While 340B-eligible health systems can breathe a momentary sigh of relief, they are still facing significant, ongoing revenue disruptions as at least 17 pharmaceutical manufacturers are restricting discounted drug sales to contract pharmacies.
Scrutiny of the 340B program, which has grown to include over 40 percent of US hospitals, will continue to raise questions aboutwhether there are better ways to subsidize the operations of hospitals serving low-income patients, and to ensure that underserved patients have access to lifesaving treatments.
CELINA, Tenn. — It was about 1 a.m. on April 19, 2016, when a burglary alarm sounded at Dale Hollow Pharmacy in Celina, a tiny town in the rolling, wooded hills near the Kentucky border.
Two cops responded. As their flashlights bobbed in the darkness, shining through the pharmacy windows, they spotted a sign of a break-in: pill bottles scattered on the floor.
The cops called the co-owner, Thomas Weir, who arrived within minutes and let them in. But as quickly as their flashlights beamed behind the counter, Weir demanded the cops leave. He said he’d rather someone “steal everything” than let them finish their search, according to a police report and body camera footage from the scene.
“Get out of there right now!” Weir shouted, as if shooing off a mischievous dog. “Get out of there!”
The cops argued with Weir as he escorted them out. They left the pharmacy more suspicious than when they’d arrived, triggering a probe in a small town engulfed in one of the most outsize concentrations of opioids in a pill-ravaged nation.
Nearly six years later, federal prosecutors have unveiled a rare criminal case alleging that Celina pharmacy owners intentionally courted opioid seekers by filling dangerous prescriptions that would have been rejected elsewhere. The pharmacies are accused of giving cash handouts to keep customers coming back, and one allegedly distributed its own currency, “monkey bucks,” inspired by a pet monkey that was once a common sight behind the counter. Two pharmacists admitted in plea agreements they attracted large numbers of patients from “long distances” by ignoring red flags indicating pills were being misused or resold. In their wake, prosecutors say, these Celina pharmacies left a rash of addiction, overdoses, deaths, and millions in wasted tax dollars.
“I hate that this is what put us on the map,” said Tifinee Roach, 38, a lifelong Celina resident who works in a salon not far from the pharmacies and recounted years of unfamiliar cars and unfamiliar people filling the parking lots. “I hate that this is what we’re going to be known for.”
Celina, an old logging town of 1,900 people about two hours northeast of Nashville, was primed for this drug trade: In the shadow of a dying hospital, four pharmacies sat within 1,000 feet of each other, at the crux of two highways, dispensing millions of opioid pills. Before long, that intersection had single-handedly turned Tennessee’s Clay County into one of the nation’s pound-for-pound leaders of opioid distribution. In 2017, Celina pharmacies filled nearly two opioid prescriptions for every Clay County resident — more than three times the national rate — according to the Centers for Disease Control and Prevention.
Visitors once came to Celina to tour its historical courthouse or drop their lines for smallmouth bass in the famed fishing lake nearby. Now they came for pills.
Soon after Weir’s police encounter in 2016, the Drug Enforcement Administration set its sights on his two Celina pharmacies, three doors apart — Dale Hollow Pharmacy and Xpress Pharmacy. Separately, investigators examined the clinic of Dr. Gilbert Ghearing, which sat directly between Dale Hollow and Xpress and leased office space to a third pharmacy in the same building, Anderson Hometown Pharmacy. Its owners and operators have not been charged with any crime.
In December, a federal judge unsealed indictments against Weir and the other owners of Dale Hollow and Xpress pharmacies, Charles “Bobby” Oakley and Pamela Spivey, alleging they profited from attracting and filling dangerous and unjustifiable opioid prescriptions. Charges were also filed against William Donaldson, the former pharmacist and owner of Dale Hollow, previously convicted of drug dealing, who allegedly recruited most of the customers for the scheme.
The pharmacists at Dale Hollow and Xpress, John Polston and Michael Griffith, pleaded guilty to drug conspiracy and health care fraud charges and agreed to cooperate with law enforcement against the other suspects.
Ghearing was indicted on drug distribution charges for allegedly writing unjustifiable opioid prescriptions in a separate case in 2019. He pleaded not guilty, and his case is expected to go to trial in September.
‘An American Tragedy’
The Celina indictment comes as pharmacies enter an era of new accountability for the opioid crisis. In November, a federal jury in Cleveland ruled pharmacies at CVS, Walgreens, and Walmart could be held financially responsible for fueling the opioid crisis by recklessly distributing massive amounts of pain pills in two Ohio counties. The ruling — a first of its kind — is expected to reverberate through thousands of similar lawsuits filed nationwide.
Criminal prosecutions for such actions remain exceedingly rare. The Department of Justice in recent years increased prosecutions of doctors and pain clinic staffers who overprescribed opioids but files far fewer charges against pharmacists, and barely any against pharmacy owners, who are generally harder to hold directly responsible for prescriptions filled at their establishments.
In a review of about 1,000 news releases about legal enforcement actions taken by the Department of Health and Human Services since 2019, KHN identified fewer than 10 similar cases involving pharmacists or pharmacy owners being criminally charged for filling opioid prescriptions. Among those few similar cases, none involved allegations of so many opioids flowing readily through such a small place.
The Celina case is also the first time the Department of Justice sought a restraining order and preliminary injunction against pharmacies under the Controlled Substances Act, said David Boling, a spokesperson for the U.S. Attorney’s Office for the Middle District of Tennessee. DOJ used the civil filing to shut down Dale Hollow and Xpress pharmacies quickly in 2019, allowing prosecutors more time to build a criminal case against the pharmacy owners.
Former U.S. Attorney Don Cochran, who oversaw much of the investigation, said the crisis in Celina was so severe it warranted a swift and unique response.
Cochran said it once made sense for small pharmacies to be clustered in Celina, where a rural hospital served the surrounding area. But as the hospital shriveled toward closure, as have a dozen others in Tennessee, the competing pharmacies turned to opioids to sustain themselves and got hooked on the profits, he said.
“It’s an American tragedy, and I think the town was a victim in this,” Cochran said. “The salt-of-the-earth, blue-collar folks that lived there were victimized by these people in these pharmacies. I think they knew full well this was not a medical necessity. It was just a money-making cash machine for them.”
And much of that money came from taxpayers. In its court filings, DOJ argues the pharmacies sought out customers with Medicaid or Medicare coverage — or signed them up if they didn’t have it. To keep these customers coming back, the pharmacies covered their copays or paid cash kickbacks whenever they filled a prescription, prosecutors allege. The pharmacies collected more than $2.4 million from Medicare for opioids and other controlled substances from 2012 to 2018, according to the court filings.
Prosecutors say the pharmacies also paid kickbacks to retain profitable customers with non-opioid prescriptions. In one case, Dale Hollow gave $100 “payouts” to a patient whenever they filled his prescription for mysoline, an anti-seizure drug, then used those prescriptions to collect more than $237,000 from Medicare, according to Polston’s plea agreement.
Attorneys for Weir, Oakley, Donaldson, Spivey, Polston, and Griffith either declined to comment for this article or did not respond to requests for comment.
Ronald Chapman, an attorney for Ghearing, defended the doctor’s prescriptions, saying he’d done “the best he [could] with what was available” in a rural setting with no resources or expertise in pain management.
Chapman added that, while he does not represent the other Celina suspects, he had a theory as to why they drew the attention of federal law enforcement. As large corporate pharmacies made agreements with the federal government to be more stringent about opioid prescriptions, they filled fewer of them. Customers then turned to smaller pharmacies in rural areas to get their drugs, he said.
“I’m not sure if that’s what happened in this case, but I’ve seen it happen in many small towns in America. The only CVS down the street, or the only Rite Aid down the street, is cutting off every provider who prescribes opioids, leaving it to smaller pharmacies to do the work,” Chapman said.
Donaldson, reached briefly at his home in Celina on March 9, insisted the allegations levied against Dale Hollow and Xpress could apply to many pharmacies in the region.
“It wasn’t just them,” Donaldson said.
The Monkey and the Monkey Bucks
Long before it was called Dale Hollow Pharmacy, the blue-and-white building that moved millions of pills through Celina was Donaldson Pharmacy, and Donaldson was behind the counter doling out pills.
Donaldson owned and operated the pharmacy for decades as the eccentric son of one of the most prominent families in Celina, where a street, a park, and many businesses bear his surname. Even now, despite Donaldson’s prior conviction for opioid crimes and his new indictment, an advertisement for “Donaldson Pharmacy” hangs at the entrance of a nearby high school.
“Bill has always had a heart of gold, and he would help anyone he could. I just think he let that, well …” said Pam Goad, a neighbor, trailing off. “He’s always had a heart of gold.”
According to interviews with about 20 Celina residents, including Clay County Sheriff Brandon Boone, Donaldson is also known to keep a menagerie of exotic animals, at one point including at least two giraffes, and a monkey companion, “Carlos,” whom he dressed in clothing.
The monkey — a mainstay at Donaldson Pharmacy for years — both attracted and deterred customers. Linda Nelson, who owns a nearby business, said Carlos once escaped the pharmacy and, during a scrap with a neighbor’s dogs, tore down her mailbox by snapping its wooden post in half.
But the monkey wasn’t the only reason Donaldson Pharmacy stood out.
According to a DEA opioid database published by The Washington Post, Donaldson Pharmacy distributed nearly 3 million oxycodone and hydrocodone pills from 2006 to 2014, making it the nation’s 20th-highest per capita distributor during that period. It retained its ranking even though the pharmacy closed in 2011, when Donaldson was indicted for dispensing hydrocodone without a valid prescription.
Donaldson confessed to drug distribution and was sentenced to 15 months in prison. The pharmacy’s name was changed to Dale Hollow and ended up with Donaldson’s brother-in-law, Oakley. In 2014, Oakley sold 51% of the business to Weir, who also bought a majority stake of Xpress Pharmacy, three doors away, according to the DOJ’s civil complaint.
Under Weir’s leadership, these two pharmacies became an opioid hub with few equals, prosecutors say. From 2015 to 2018, Dale Hollow and Xpress pharmacies were the fourth-and 11th-highest per capita opioid purchasers in the nation, according to the DOJ, citing internal DEA data.
Many of these prescriptions were for Subutex, an opioid that can be used to treat addiction but is itself prone to abuse. Unless the patient is pregnant or nursing or has a documented allergy, Tennessee law requires doctors instead to prescribe Suboxone, an alternative that is much harder to abuse.
But at the Celina pharmacies, prescriptions for Subutex outnumbered those for Suboxone by at least 4-to-1, prosecutors say. In their plea agreements, pharmacists from Dale Hollow and Xpress described stores that thrived on the trade in Subutex, and said Weir set “mandates” for how many Subutex prescriptions to fill and instructed them to “never run out.”
Griffith, the head pharmacist at Xpress, said the pharmacy in 2015 created flyers specifically advertising Subutex, then delivered them on trays of cookies to practices throughout Tennessee, including some hours away. In the following two years, the amount of Subutex dispensed by Xpress increased by about eightyfold, according to his plea agreement.
Dale Hollow didn’t need flyers or cookies. It had Donaldson.
After getting out of prison in 2014, Donaldson was hired by the pharmacy he once owned, where he “recruited and controlled” about 50% to 90% of customers, according to the indictment filed against him. The pharmacy also enticed customers by distributing a Monopoly-like currency called “monkey bucks” — an apparent callback to Carlos — that could be spent at the pharmacy like cash, the indictment states.
Prosecutors also allege that, from a desk inside Dale Hollow, Donaldson would sign customers up for Medicare or Medicaid, then use a vehicle provided by the pharmacy to drive them to a doctor’s office to get opioid prescriptions, then back to Dale Hollow where he’d offer to cover their copays himself if they kept their business at the pharmacy. Sometimes, he would text the Dale Hollow pharmacist with instructions to fill specific prescriptions, or just to fill more of them, according to federal court records.
“Y’all have got to get your numbers up. Fill fill,” Donaldson texted Polston in 2018, according to his plea agreement.
By then, however, all those prescriptions had drawn unwanted attention.
In August 2018, Dale Hollow and Xpress pharmacies were raided by DEA agents, who brought with them Fox News’ Geraldo Rivera and a television crew. Six months later, DOJ filed its civil complaint, persuading a federal judge to immediately close both pharmacies.
Today, Dale Hollow Pharmacy sits shuttered, as it has been for the past three years, and a paper sign taped to the door says animals are not allowed inside by order of the DEA. The building that was once Xpress Pharmacy reopened this year as an unrelated pharmacy with a fresh coat of paint. Ghearing’s clinic and Anderson Hometown Pharmacy are closed.
Most of Celina’s opioid prescriptions are gone, too. According to the latest available CDC data, Clay County reported about 32 opioid prescriptions per 100 residents in 2020 — one-sixth the rate of 2017’s.
Obamacare enrollment at a record-high 14.5 million
Congress may not fund premium subsidies in 2023
The Affordable Care Act marks its 12th anniversary Wednesday, and despite a record 14.5 million enrollees, the Biden administration is preparing for the possibility that millions could lose coverage next year.
The $1.9 trillion pandemic stimulus package (Public Law 117-2), signed March 2021, reduced Obamacare premiums to no more than 8.5% of income for eligible households and expanded premium subsidies to households earning more than 400% of the federal poverty level. The rescue plan also provided additional subsidies to help with out-of-pocket costs for low-income people. As a result, 2.8 million more consumers are receiving tax credits in 2022 compared to 2021.
But without congressional action, the subsidies—and the marketplace enrollment spikes they ushered in—could be lost in 2023. A new HHS report released Wednesday, shows an estimated 3.4 million Americans would lose marketplace coverage and become uninsured if the premium tax credits aren’t extended beyond 2022.
In a briefing with reporters Tuesday, Chiquita Brooks-LaSure, administrator for the Centers for Medicare & Medicaid Services, said her agency is “confident that Congress will really understand how important the subsidies were” to enrolling more people this year. The CMS would “pivot quickly,” however, to implement new policies and outreach plans if the subsidies aren’t extended as open enrollment for 2023 begins in November.
“That said, today and tomorrow we are celebrating the Affordable Care Act,” Brooks-LaSure added. “As part of that process, we’ve been reminding ourselves that sometimes it takes some time to pass legislation. And just like the Affordable Care Act took time, we’re confident that Congress is going to address these critical needs for the American people.”
After years of legal and political brawls that turned the landmark legislation into a political football, Obamacare “is at its strongest point ever,” Brooks-LaSure said. The 14.5 million total enrollees—those who extended coverage and those who signed up for the first time—is a 21% increase from last year. The number of new consumers during the 2022 open enrollment period increased by 20% to 3.1 million from 2.5 million in 2021.
This week, the Department of Health and Human Services will highlight the impact of the ACA and the Biden administration’s efforts to strengthen the law. The CMS recently announced a new special enrollment period opportunity for people with household incomes under 150% of the federal poverty level who are eligible for premium tax credits. The new special enrollment period will make it easier for low-income people to enroll in coverage throughout the year.
Troubled times could be around the corner, however, as millions of people with Medicaid coverage could become uninsured after the public health emergency ends. Under the Families First Coronavirus Response Act (Public Law 116-127), signed March 2020, states must maintain existing Medicaid enrollment until the end of the month that the public health emergency is lifted. Once the continuous enrollment mandate ends, states will resume Medicaid redeterminations and disenrollments for people who no longer meet the program’s requirements.
Dan Tsai, deputy administrator and director of the Center for Medicaid and CHIP Services at CMS, said the agency is working with states to make sure people who lose Medicaid coverage can be transferred into low- and no-cost Obamacare coverage.
“A substantial portion of individuals who will no longer be eligible for Medicaid will be eligible for other forms of coverage,” including marketplace coverage, Tsai told reporters Tuesday.
In a statement, President Joe Biden acknowledged the law’s great impact. “This law is the reason we have protections for pre-existing conditions in America. It is why women can no longer be charged more simply because they are women. It reduced prescription drug costs for nearly 12 million seniors. It allows millions of Americans to get free preventive screenings, so they can catch cancer or heart disease early—saving countless lives. And it is the reason why parents can keep children on their insurance plans until they turn 26.”
Net prices of brand-name drugs have increased significantly over the last decade. But savings from generics have driven average prescription prices down in Medicare and Medicaid, Axios’ Caitlin Owens writes about a new analysis by the Congressional Budget Office.
Why it matters: The analysis reiterates that the generic market is largely working as it’s intended to.
By the numbers: The average net price of a prescription fell from $57 in 2009 to $50 in 2018 in Medicare Part D, and from $63 to $48 in Medicaid.
The drop is largely attributable to the growing use of generics, which jumped from 75% to 90% of all prescriptions nationally during that time frame. The average price for a generic prescription also fell in both programs.
But the average net brand-name prescription price more than doubled in Part D and increased by 50% in Medicaid, per the analysis. These increases were driven by higher launch prices for new drugs and price increases for drugs already on the market.
Merck antiviral drug molnupiravir received emergency authorization, joining Pfizer’s Paxlovid as the only authorized oral antiviral drugs for treating Covid-19. Though the Merck and Pfizer antivirals appear to work against the omicron variant, FDA officials stressed that these drugs are authorized only for certain patients and they are not a substitute for vaccination.
Merck’s oral antiviral drug molnupiravir now has FDA emergency use authorization for treating mild-to-moderate Covid-19, a Thursday decision that comes one day after the regulator authorized use of a pill from Pfizer. The FDA actions come as the highly infectious omicron variant becomes the dominant strain of the novel coronavirus, fueling a rise in Covid-19 cases that is pushing hospitals to capacity across the country.
The Merck and Pfizer antivirals both work by interfering with the virus’s ability to replicate, though in different ways. Molnupiravir introduces errors into the genetic code of SARS-CoV-2, while Paxlovid targets a key viral enzyme called main protease. Patrizia Cavazzoni, director of the FDA’s Center for Drug Evaluation and Research, said both drugs should work against omicron.
“The available data that we have indicate that both Paxlovid and molnupiravir are effective against omicron,” Cavazzoni said, speaking during a Thursday morning media briefing. “Both drugs interfere with aspects of the virus’s replication apparatus, and that apparatus is preserved across variants.”
Molnupiravir’s authorization, which comes three weeks after an FDA advisory committee meeting for the drug, covers its use in adults diagnosed with Covid-19 who are at a high risk of their disease progressing to hospitalization or death. The Merck drug is to be used when other treatment options are not accessible or appropriate. It can only be prescribed to those 18 and older because the drug can affect bone and cartilage growth.
Authorized use of Pfizer’s antiviral, Paxlovid, extends to pediatric patients. The FDA’s guidelines state the drug may be used for treating Covid-19 patients 12 and older weighing at least 40 kg (about 88 pounds). The FDA did not convene an advisory meeting for the Pfizer drug. John Farley, director of FDA’s Office of Infectious Diseases, said there were no pressing scientific questions about Paxlovid that would benefit from an advisory committee discussion.
Both molunupiravir and Paxlovid are available only by prescription. The FDA said treatment with these drugs should begin as soon as possible after a positive Covid-19 diagnosis, and within five days of the start of symptoms. These drugs aren’t for patients who are already hospitalized. Earlier this year, Merck stopped testing molnupiravir in those who are hospitalized after an early look at Phase 2 trial data indicated that the drug was unlikely to help these patients.
Authorization of Merck’s antiviral is based on a placebo-controlled clinical trial enrolling non-hospitalized adults with Covid-19 who were at high risk of progressing to severe disease or hospitalization. These higher risk patients include those who have a chronic medical condition or those who had not or could not receive a Covid-19 vaccine. The main goal was to measure the percentage of people hospitalized or dead from any cause during the 29 days after the course of treatment. The FDA said that of the 709 people in the study who received molnupiravir, 6.8% were hospitalized or died. By comparison, 9.7% of the 699 people given a placebo were hospitalized or died. During the follow-up period, one patient treated with molnupiravir died compared to nine of those given a placebo. Side effects reported include diarrhea, nausea, and dizziness.
In the clinical trial for Pfizer’s antiviral, Paxlovid led to an 88% reduction in Covid-19-related hospitalization or death from any cause compared to placebo. Of the 1,039 patients treated with Paxlovid, 0.8% of patients were hospitalized or died during the 28-day follow-up period, compared to 6% of those given a placebo.
Farley said that patients should consult with their physician to determine the best treatment. While molnupiravir is indicated for those who don’t have other treatment options, there are some groups of patients in which Paxlovid would not be appropriate. Examples include patients taking other medications that could interact with the Pfizer drug, Farley said. Paxlovid is also not recommended for patients who have severe kidney problems or cirrhosis of the liver. The key feature of both drugs is that they are oral, which enables patients to take these medication at home. Authorized antibody therapies from Regeneron, Eli Lilly, partners Vir Biotechnology and GlaxoSmithKline, and Roche, are infusions that must be administered in a clinical setting.
Patients take Merck’s molnupiravir as four pills, twice a day. Patients prescribed Pfizer’s Paxlovid must take more pills. The drug is taken with ritonavir, a drug that slows the breakdown of Paxlovid and helps it remain in the body for a longer period of time. Dosing of the Pfizer drug requires two tablets of Paxlovid and one of ritonavir, twice daily. The duration of treatment for both the Merck and Pfizer antivirals is five days.
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.”
Senate Democrats announced a compromise budget framework to fund President Biden’s social spending plans to the tune of $3.5T, including substantial money for some of the administration’s key healthcare priorities. The framework sends instructions to several Senate committees, including the Budget and Finance panels, to craft legislative language around the central components of the deal, with the goal of passing a spending package before next month’s recess.
Many specifics remain to be ironed out in negotiations among the party’s progressive and moderate camps, but some of the main elements of the deal became clear this week. The plan includes extending theenhanced subsidies for purchasing individual coverage on the healthcare marketplaces, which were implemented earlier this year as part of the American Rescue Plan Act. It would also seek to close the so-called “Medicaid coverage gap”, by providing new coverage options for low-income adults in states that did not expand Medicaid under the Affordable Care Act (ACA).
New investments would be made in home- and community-based services for long-term care, along the lines of the $400B proposed in President Biden’s American Families Plan. And the budget deal envisions expanding benefits in the Medicare program to include dental, vision, and hearing services. Given the budgetary concerns of moderate Democratic lawmakers like Sen. Joe Manchin (WV), one critical question will be how the $3.5T deal will be paid for. One likely source of funding for the deal will be reforming the way Medicare purchases prescription drugs, making that long-time Democratic policy objective a probable part of any final package.
Notably absent from the healthcare spending proposals: lowering the eligibility age for Medicare from 65 to 60. No final decision has been reached on whether to incorporate such a move; rather, the question will be sent to the Senate Finance Committee for consideration. Given the urgency of passing as much of the Biden administration’s legislative agenda as possible before the midterm campaign season begins in earnest, we think it’s unlikely that Democrats will be willing to cross the Rubicon of Medicare expansion at this point.
The prospect of having to gain support from all 50 Democratic senators—as zero Republicans are expected to support the package—will likely temper any appetite for picking a fight with the influential hospital and physician industries, which have strongly opposed Medicare expansion.
One longer-term implication of the apparent decision to favor expansion of Medicare benefits over lowering the Medicare eligibility age now:a richer package of services in traditional Medicare might make Medicare Advantage (MA) a less attractive alternative for potential enrollees and could undermine any future efforts to create an “MA buy-in” for coverage expansion.
Expect lobbying and negotiations to reach a furious pace over the next several weeks, as lawmakers work out the final details of the $3.5T spending plan.