Maximum rise in drug prices in the battle of privately insured sparks

Maximum rise in drug prices in the battle of privately insured sparks

Washington — Workers and families with private health insurance would reap savings on prescription drugs from an unnoticed provision in President Joe Biden’s comprehensive social agenda bill. It aims to break the cycle of annual price increases for widely used drugs.

This ruling would require drug companies to pay rebates to Medicare if they raise prices above the rate of inflation. Medicines sold to special plans will count toward the penalty calculation, such as the price increase tax. The issue is that business groups have split in a fierce pressure battle.

Groups of companies that focus on affordable employee benefits want to keep the language the same so that they protect against price increases for companies and their employees, not just Medicare enrollees. Other groups, such as the influential US Chamber of Commerce, are backing the pharmaceutical industry’s campaign to ban price controls, including inflation caps, saying they would stifle innovation.


House Democrats passed the nearly $2 trillion Social Agenda Act Friday and sent it to the Senate. The bill redefines national priorities on issues from climate to family life and faces more scrutiny in that evenly divided room. Prescription drugs are only one component, and most attention has focused on Medicare’s provisions to cut out-of-person costs for seniors and allow the program to negotiate prices for a limited number of drugs.

But the inflation ceiling will have a far-reaching impact for up to 180 million Americans who have private insurance.

“A lot of people don’t realize that the bill applies to people who are privately insured and it will help them,” said Shaun Greminger, director of health policy at Buyer Business Group on Health. “But that’s not a sure thing. As it is currently regulated, that will be the case. But we were concerned and still worry that that will change.” Its consortium represents nearly 40 large employers covering more than 15 million workers, retirees and their families.


Setting a cap on inflation would be a “game changer,” said James Gelfand, vice president of Eric, a group that represents major national companies as providers of employee benefits.

Previous legislation would have built “inflation discounts” on sales of Medicare plans, but the bill passed by the House expands the wording to include private plans.

“If they raise prices in private markets faster than the economy is growing, they will be asked to return that money to the government,” Gelfand said, the goal being to deter drug companies from exorbitant price increases.

Polls show that Americans across the political spectrum overwhelmingly favor government measures to lower drug prices. The main cost complaints are: high costs for patients out of their own money, high and escalating list prices, and high launch prices for new drugs. Biden’s package will address the first two issues, but Democrats have been unable to agree on authorizing Medicare to negotiate prices for new drugs.


Annual increases in prescription drug prices usually outweigh inflation, although there have been periods of moderation in recent years.

Gremminger said his group estimates the private insurance market could save $250 billion over 10 years under the current inflation ceiling in the bill. Without them, Gelfand estimates that employers could face an additional 3.7% annual increase in health care costs over typical medical inflation because drug companies could actually raise prices on privately insured patients to offset rebates paid on behalf of Medicare enrollees.

“It is true that not all business groups are in the same place,” Gelfand said of the divisions in the business community. “If you look at the groups on both sides of the problem, there are groups that protect drug business interests, and then there is everyone else.”


The industry’s main lobbying group, Pharmaceutical Research and Manufacturers America, says inflationary cuts will undermine innovation that continues after drugs are approved.

The generic drug industry wants to exempt its products. Dan Leonard, president of the public lobbying group Association for Accessible Medicines, said he fears penalizing its members for price increases that run into pennies on the dollar. “When the generics are not exempted…they will get stuck in jet-washing,” he said.

In the Senate, Finance Committee Chairman Ron Wyden, a Democrat from Oregon, who has pioneered prescription drugs, supports keeping inflation limits for privately insured people.

Opponents can pursue a parliamentary challenge under Senate rules, arguing that penalizing a price increase by one private company over another has no bearing on federal budget issues. If the challenge succeeds, the costs of private insurance plans will be stripped of inflation deductions. The hat proponents say they have a purpose in the budget because they will increase revenue and generate savings for Medicare.


Katie Mahoney, chief health policy expert at the US Chamber of Commerce, said her organization has “very real concerns” that drug pricing provisions will undermine the industry’s incentives to develop new drugs, and she is pressing the point in the Senate.

“We continue to do the damage that such policies can do,” she said. “We feel that this message is making progress with members of the Senate and with some members of Congress.”

Asked about other business groups that support inflation caps, Mahoney said they do not generally reflect private enterprise.

“When you look at those other organizations, they are first and foremost much smaller and their policy focus is very narrow,” she said. “They don’t represent business across the board, they represent a very secretive, narrow slice of the issues.”

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