Biden’s proposed inflation cap on drug prices includes private insurance plans


Workers and families with private health insurance would save on prescription drugs thanks to a little-noticed provision in President Joe Biden’s broad Social Agenda bill. It aims to break the cycle of annual increases in the prices of widely used drugs.

This provision would require drug companies to pay rebates to Medicare if they raise prices above the rate of inflation. Drugs sold to private plans would be taken into account in calculating the penalty, such as a tax on price increases. The stake divides business groups in a fierce lobbying battle.

Business groups focused on affordable benefits want to keep the language as it is so that it offers protection from rising prices to businesses and their workers, not just Medicare registrants. Other groups such as the influential US Chamber of Commerce are backing the pharmaceutical industry’s campaign to block price restrictions, including inflation caps, saying they would stifle innovation.

House Democrats passed roughly $ 2 trillion on the social agenda legislation last Friday and sent it to the Senate. The bill resets national priorities on issues ranging from climate to family life and is subject to further consideration in this equally divided chamber. Prescription drugs are only one element, and most of the attention has been focused on Medicare’s provisions to reduce out-of-pocket expenses for the elderly and allow the program to negotiate the prices of a number. limited medication.

But inflation caps would have a dramatic impact on up to 180 million Americans with private insurance.

Private plans

“A lot of people don’t realize that the bill applies to private policyholders and will help them,” said Shawn Gremminger, director of health policy at Buyer Business Group on Health. “But that’s not a sure thing. As currently structured, this would be the case. But we have been concerned and continue to be concerned that this will change. His coalition represents nearly 40 large employers who cover more than 15 million workers, retirees and their families.

Inflation caps would be a “game changer,” said James Gelfand, vice president of ERIC, a group that represents large domestic companies as providers of employee benefits.

Previous legislation would have based “inflation rebates” on sales to health insurance plans, but the bill passed by the House expands the formula to include private plans.

“If they increase prices in private markets faster than the economy grows, they will be required to return that money to the government,” Gelfand said. The aim is to dissuade pharmaceutical companies from raising their prices wildly.

Polls show that Americans of all political stripes are overwhelmingly in favor of government action to reduce drug prices. The main cost complaints are: high out-of-pocket costs for patients, high and rising list prices, and high introductory prices for new drugs. The Biden package would tackle the first two issues, but Democrats have failed to agree to allow Medicare to negotiate the prices of new drugs.

Annual increases in established prescription drug prices generally exceed inflation, although there have been periods of moderation in recent years.

Anticipated savings

Gremminger said his group estimates the private insured market could save $ 250 billion over 10 years below the inflation caps currently set in the bill. Without them, Gelfand estimates that employers could face an additional 3.7% annual increase in health care costs over usual medical inflation, as pharmaceutical companies could actually increase the prices of insured patients by private to offset rebates paid on behalf of Medicare registrants.

“It’s true that not all business groups are in one place,” Gelfand said of the divisions in the business community. “If you look at the groups on either side of the problem, there are groups protecting pharma business interests, and then there’s everyone. “

The pharmaceutical industry’s leading lobby group, Pharmaceutical Research and Manufacturers of America, says rebates on inflation would undermine innovation that continues after drugs are approved.

The generic drug industry wants their products exempt. Dan Leonard, chairman of the generic lobbying group Association for Accessible Medicines, said he was concerned its members would be penalized for price increases of pennies on the dollar. “When generics are not exempt… they will be taken in the jet wash,” he said.

In the Senate, Finance Committee Chairman Ron Wyden, D-Ore., Who has played a leading role in prescription drugs, supports maintaining inflation caps for private policyholders.

Challengers Route

Opponents could pursue a parliamentary challenge under Senate rules, arguing that penalizing price increases from one private company to another has no bearing on federal budget matters. If the challenge succeeds, the costs for private insurance plans would be taken out of the inflation rebates. Supporters of the caps say they have a budget target because they would increase income and generate savings for Medicare.

Katie Mahoney, the United States Chamber of Commerce’s leading health policy expert, said her organization “very sincerely” fears drug pricing provisions will spur industry to develop new drugs , and insisted on this point in the Senate.

“We continue to hammer home the damage such policies would do,” she said. “We believe this message is catching on with senators and some members of Congress.”

Asked about other business groups that support inflation caps, Mahoney said they don’t reflect private enterprise in general.

“When you look at these other organizations, first of all, they are much smaller and their political orientation is very narrow,” she said. “They don’t represent business at all levels, they represent a very low key and narrow slice of issues.”

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