The Balancing Act of Prescription Drug Price Reform

August 15, 2022 Updated January 19, 2024 Policy Analysis

By: Lubna Hassan Heikal and Shahzeb Malik, Sr. Health Policy Fellows

For decades, prescription drug prices for life-saving medications like Revlimid, which treats various cancers, have increased exponentially. Since its launch in 2005, the price of Revlimid has increased 23 times from $215 to $730 per pill, as reported by the Committee on Oversight and Reform. Between 2009 and 2018, the Congressional Budget Office (CBO), a nonpartisan federal agency that provides budget and economic information to Congress, found that the average price more than doubled for brand-name prescription drugs. Another analysis from the Kaiser Family Foundation discovered that price increases outpaced inflation for half of all drugs covered by Medicare between 2019 and 2020.

Medicare Part D, passed under the Bush Administration as an expansion of Medicare to include coverage for pharmaceutical drugs, made negotiating drug prices with the pharmaceutical industry illegal. The passage of the Affordable Care Act (Obamacare) expanded the scope and scale of government spending on healthcare. Still, this critical piece of legislation remained in place, allowing the pharmaceutical industry to charge exorbitant prices and rake in record profits with American taxpayers footing the bill. That is beginning to change.

The Inflation Reduction Act of 2022 (IRA), which passed the House on Friday, includes several provisions regarding drug prices and health insurance. Most notably, this broad budget bill will empower the Secretary of Health and Human Services (HHS), Xavier Becerra, to negotiate prices directly with pharmaceutical companies, which the industry has vehemently opposed for years. Initially, they will be able to negotiate prices for up to 10 drugs, including drugs like Humira and Revlimid, which have been on the market for several years but still lack generic competition. With the IRA heading to President Biden’s desk, our country is at a critical turning point in addressing the economic and ethical costs of American health care.

The legislation will save Americans, particularly seniors and people with disabilities, thousands of dollars in medication costs each year by limiting how much Medicare recipients have to pay out of pocket for drugs at the pharmacy. Additionally, the higher premium subsidies that some individuals have received during the Covid-19 pandemic to get health coverage under the Affordable Care Act would be extended, and drug makers would absorb some costs of these drugs. The CBO estimates that the bill’s prescription drug reforms will save the federal government $288 billion over ten years.

The negotiated prices would not take effect until 2026, and would only apply to a fraction of prescription drugs accepted by Medicare beneficiaries. Critics of the reform also voice their concern that the pressure on pharmaceutical companies will crush innovation for new drugs. Still, others believe this will only propel investments for essential drugs forward. Although this legislation is not the end goal for reform, it is one step closer to healthcare equity and accessibility for all Americans.

Healthcare policy affects every single American community, including the Muslim community. American Muslims are overrepresented in the U.S. healthcare system, leading scientific research and saving the lives of countless Americans on the frontlines of health policy. MPAC will build upon our work with The Administration, Capitol Hill, and HHS Secretary Becerra to address the Muslim State of Health. Additionally, we aim to collaborate with Dr. Shereef Elnahal as Under Secretary for Health at the Veterans Health Administration. He is now one of the highest ranking members of the Biden Administration from the American Muslim community. He will oversee hundreds of hospitals and clinics that comprise the largest health care system in the nation. We must continue working with elected officials and candidates to propel our nation’s commitment to diversity and inclusion. We must examine the complex health issues facing groups like veterans, seniors, and other underserved populations to engage policymakers in pursuit of one goal: healthier communities.

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