When Senate Democrats drafted their legislation to lower drug prices, they wanted two main measures that would encompass both the private insurance and Medicare markets.
In the end, however, they were forced to restrict the provisions — limiting drug price increases to inflation and imposing a $35 cap on insulin prices — to Medicare just to allow their health and climate package to be approved through reconciliation what is required is only a simple majority.
The chamber’s parliamentarian ruled that the extension of the measures to the private market was not compatible 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 legislation later this week.
The US private market is huge but fragmented among many insurers. More than 150 million Americans and their families are covered by employers, and more than 14.5 million people have Affordable Care Act policies.
With more than 64 million enrolled seniors and people with disabilities, Medicare is also a major concern and has long impacted the nation’s healthcare system.
The narrower focus of the bill shouldn’t hurt the private insurance market and could even help curb drug price increases in the future, health policy experts said.
“I don’t think we have reason to believe that the policies that are going to change on Medicare will increase prices outside of Medicare,” said Dr. Benjamin Rome, 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 for Medicare, the Congressional Budget Office said the provision would also reduce the cost of drug services paid for by private insurance plans. But the savings were more modest than the CBO estimated for legislation that would have included the private market, said Loren Adler, deputy 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 provision of the bill, 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 benefits managers, who negotiate with drug companies on behalf of insurers, Medicare drug plans, large employers and other payers, an even stronger negotiating position for their private-sector clients, she said.
Also, the cost of Part B drugs, which are expensive drugs administered by physicians, are based on the same average sales Prices paid by commercial insurers. So the inflation cap on Medicare could dampen producer prices Hikes also for the private market, Rome said.
However, pharmacy-bought Part D drugs are priced using different base rates, so the cap may not have as much impact on private market insurers’ payments.
Involving the private market in the legislation would have provided additional protection against bad behavior by drugmakers and given them less leverage to raise prices outside of Medicare, Conti said. It would also have guaranteed that insurers would pass on the savings they receive from drug manufacturers to their policyholders.
Still, some employers’ representatives are concerned that the legislation could mean higher drug prices for companies and their workers, as the private market has been excluded from the inflation cap.
The legislation would disrupt drugmakers’ Medicare business model and prompt them to shift the cost to employers, said Alan Gilbert, vice president of policies at the Purchaser Business Group on Health, which represents 40 private companies and public entities that provide health insurance for people more than 21 million Americans buy.
“It’s like a balloon,” Gilbert said. “You squeeze one end and it bulges out the other. That is a real concern for us.”
Another group that could be negatively affected are children, rather than older adults, who use expensive drugs that don’t have much competition, Conti said. Drug makers might try to increase the prices of their prescriptions or set higher introductory prices for drugs targeting these populations because they wouldn’t benefit from Medicare’s leverage. However, this applies to a relatively small group of drug users and Americans, she said.
The Pharmaceutical Research and Manufacturers of America, known as PhRMA, said lawmakers are not looking out for patients.
“The sad reality is that there is almost nothing in this bill to help patients in the commercial market who are struggling to afford their drugs,” said Brian Newell, spokesman for the PhRMA.
Restricting the $35 cap on insulin prices to Medicare enrollers only isn’t as consequential, experts said. While the cost of insulin has skyrocketed over the years, many privately insured people are already paying no more than that amount.
According to an analysis by the Kaiser Family Foundation, about a fifth of those who take insulin and have health insurance through major employers pay more than $35 a month for the drug. More than a quarter of people with Affordable Care Act policies and almost a third of those insured by a small employer pay more than this threshold.
Some private insurers and states are taking action to help Americans afford the drug. UnitedHealthcare will eliminate insulin copayments for certain policyholders starting next year, while 20 states have capped copayments. Also, two drugmakers are working on low-cost versions of the drug, while some other manufacturers are offering deep discounts to certain patients.
“Bottom line, I don’t think there’s going to be much of an impact for the private sector to get rid of it,” said Gerard Anderson, a professor of health policy and management at Johns Hopkins University, of the insulin cap.