Medicare could have saved more than $16.7 billion on three kinds of insulin products from 2011 to 2017 if it had secured the same discounts other federal health programs get through negotiations, House Democrats argue in a new report.
On Dec. 10, Democrats on the House Committee on Oversight and Reform released a final majority staff report, which they say is the culmination of an almost 3-year investigation into pharmaceutical pricing and business practices. The report draws from 1.5 million pages of internal company documents, the committee says.
Documents from insulin makers Eli Lilly, Novo Nordisk, and Sanofi indicate these firms “raised their prices in lockstep in order to maintain ‘pricing parity’,” with senior executives encouraging the practice, the committee staff writes in the report.
“In a discussion among Novo Nordisk employees about an Eli Lilly price increase for a different diabetes product on Dec. 24, 2015, a Novo Nordisk pricing analyst remarked, ‘[M]aybe Sanofi will wait until tomorrow morning to announce their price increase ... that’s all I want for Christmas,’” the report states.
House Democrats are seeking to use the report findings to aid their Senate colleagues’ attempt to pass the sweeping Build Back Better bill, which includes many provisions addressing drug costs.
It’s still unclear when the Senate will act on the measure. The House passed the Build Back Better bill, 220-213, in November. It includes a provision that would allow Medicare to negotiate the prices of certain drugs covered by Part D pharmacy plans.
That would mark a reversal of the stance taken when Congress created the pharmacy benefit in a 2003 law, which left negotiations to insurers that cover Part D plans.
Republicans have long argued insurers get the best deals on drugs for people on Medicare. Democrats say this approach sacrifices much of Medicare’s bargaining clout, scattering it among plans.
“This fight has been going on since the Medicare Part D legislation which gave away the store” to drugmakers, said Speaker Nancy Pelosi (D-CA) at a Dec. 10 press conference about the House Oversight report. “And they got used to having the store to themselves.”
The Endocrine Society is urging the Senate to protect the insulin affordability provisions included in the Build Back Better Act and move quickly to pass this crucial legislation.
“We implore all Senators to ensure these provisions are not scaled back. The Build Back Better Act represents the best opportunity to address the price of insulin. Millions of Americans cannot wait any longer for a solution,” it said in a statement issued Dec. 14.
Better deals for military, medicaid programs
Medicare is unusual among federal programs in that it doesn’t directly leverage its clout to lower drug costs.
Total Part D expenditures were approximately $105 billion last year, according to Medicare’s board of trustees. This spending is divided among the many insurers that run Part D plans, which then make a myriad of decisions about formularies and other factors that affect pricing.
For drugs administered by clinicians, and thus covered by Medicare Part B, the program pays a premium of the reported average sales price. Part B drug spending was $39 billion in 2019, an increase of about 11.6% from the previous year, according to the Medicare Payment Advisory Commission.
In contrast, federal law calls for steep reductions in drug prices for people on Medicaid.
The Department of Veterans Affairs (VA) and the Defense Department (DoD)’s Tricare program use several bargaining strategies to lower prices. To control costs, VA and DoD often use formularies of preferred drugs, steer patients to lower-cost drugs, and buy drugs in large volumes, “all of which increase their leverage with drug manufacturers,” the staff of the Congressional Budget Office (CBO) wrote in a Feb. 2021 report.
The CBO report examines how those different federal agencies’ approaches played out in terms of prices, net of applicable rebates, and discounts of 176 top-selling brand-name drugs in Medicare Part D.
The average price for this group of drugs was $118 in Medicaid. And for VA and DoD, the average prices were $190 and $184, respectively, for drugs dispensed at the agencies’ medical facilities or by mail.
But for Medicare Part D, the average price was $343, CBO said in the report, which was one of the sources consulted by House Oversight staff when developing their report released on Dec. 10.