House Committee Report:  Medicare Could have Saved Billions

House Committee Report:  Medicare Could have Saved Billions

After a three-year investigation into how pharmaceutical companies set their prices, the House Oversight and Reform Committee released its report last week that said Medicare could have saved more than $25 billion if allowed to negotiate better prices for the most expensive medicines over a five-year period.

According to the report, drug makers such as Pfizer Inc., Teva Pharmaceutical Industries Ltd., and Celgene Corp. specifically target the U.S. for price increases because there’s no government effort to control the price of medicine, according to internal documents released by the committee.

The findings show that companies studied by the committee raised prices of common brand-name drugs during the past five years by nearly four times the rate of inflation. The report seeks to debunk industry contentions that companies’ price strategy is needed to plow money back into researching and developing new medicines, finding that revenue is substantially greater than those investments.

The report found the government could have saved $25 billion from 2014 through 2018 if it were able to peg the price of just seven costly medicines in Medicare Part D, which covers outpatient drugs, to their cost to other federal programs that negotiate directly with drug makers.

Negotiating the price of insulin over a seven-year period would have saved an additional $16 billion.

Because of legislation allowing Medicare to negotiated drug prices with the drug manufacturers has passed the House of Representatives and is pending in the Senate, the big drug companies have launched a massive lobbying campaign to try and stop it in the Senate.

One of their tactics is to blame others for the huge price increases in drugs, specifically the “middle men” called Pharmacy Benefit Managers (PBMs), something most Americans were totally unaware even existed until this fight over reducing drug prices began.

The PBMs are fighting back with their own lobbying effort and as a result, adds attacking both sides are now widely broadcast on TV and other media.

Republicans on the Oversight Committee have sided with the big drug companies and countered the Oversight Committee’s report with a report of their own on the role pharmaceutical industry middlemen play in raising drug prices.

The Republican report outlined how pharmacy benefit managers distort drug markets to reap profits and, in some cases, make it harder for patients to access their preferred medicines.

The Democrats’ report seeks to rebut some of the pharmaceutical industry’s main arguments against allowing the government to seek lower drug prices, including that high profits are needed to afford development of innovative new drugs. It does this by showcasing how much money the companies spent on stock buybacks and executive bonuses, some of them tied to revenue targets achieved by price increases.

The 14 largest pharmaceutical companies in the U.S. spent $577 billion on stock buybacks and dividends from 2016 to 2020, $56 billion more than they spent on research and development over that time. This meant the companies spent more rewarding shareholders than on developing new medicines, the report said.

The 10 brand-name pharmaceutical companies at the center of the committee’s investigation paid their top executives more than $2.2 billion from 2016 to 2020, the report found. The highest paid executives on that list were paid $347.7 million in those four years.

The Democrats’ report also cited internal documents obtained by the committee finding that patient assistant programs—deployed by drug companies to cover copayments for some people who can’t afford them—actually drove up profits instead of operating as charitable enterprises.

Pfizer’s copay program kept patients on its brand-name drug Lyrica even after low-cost generics hit the market, the committee revealed. Teva and AbbVie noted in documents that donations to third-party organizations that subsidize the cost of medicines for people on Medicare attracted patients to their products.

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