On behalf of our approximately 1.2 million members and supporters, The Senior Citizens League (TSCL) would like to thank House Committee on Oversight and Government Reform Chairman Jason Chaffetz and Ranking Member Elijah Cummings for convening this important hearing and for allowing us the opportunity to submit a statement regarding the recent developments in the prescription drug market.
TSCL consists of active and informed members, most of whom are beneficiaries of the Medicare prescription drug program (Part D). We hear concerns from them on a daily basis about the rising prices of their brand-name, specialty, and even generic prescription drugs.
One member, Millicent Graves of Williamsburg, Virginia, was shocked last year when the retail price of her generic psoriasis medication jumped by 1,691% in just over three months. She told us, “When I looked at the receipt I almost passed out … Where is that money going? I think the government needs to investigate.” She also told us she would be keeping use of the medicine to a minimum even though it worked well to minimize her symptoms. She does not want to hit the Part D doughnut hole, where she would be required to cover 58 percent of the cost of the drug this year.
In recent surveys of TSCL’s members, we have found that Millicent Graves is not alone. As many as one-third of Medicare households said they postponed filling their prescriptions or took less than the prescribed amount largely due to high costs. The problem is particularly acute in years like 2016, 2011, and 2010, in which retirees received no Social Security cost-of-living adjustment but medical costs increased. According to the Centers for Medicare and Medicaid Services, spending on prescription drugs grew 12 percent nation-wide last year – a rate that hasn’t occurred since 2001. In addition, average Part D premiums rose by 13 percent this year, while Part D deductibles experienced the largest increase since the start of the program, from $320 in 2015 to $360 in 2016.
Improving and maintaining access to affordable, lifesaving prescription drugs is a top concern for older Americans. The majority of Medicare beneficiaries live on fixed incomes and cannot afford steep and sudden cost increases. Based on surveys and comments that TSCL has received, most older Americans believe that pricing in the prescription drug market is flawed, resulting in higher premiums, deductibles, co-pays, and co-insurance.
Lifesaving drugs for cancer, heart disease, arthritis, hepatitis, and other life-threatening diseases carry such enormous price tags that older Americans worry their life savings will be drained if they are unlucky enough to get sick. They question why Congress hasn’t taken legislative action to improve the system and protect the American public from price gouging.
TSCL’s members believe the Prescription Drug Affordability Act (S. 2023, H.R. 3513), sponsored by Senator Bernie Sanders and Congressman Elijah Cummings, would go a long way in increasing reliable access to prescription drugs, and they urge Congress to adopt it before the end of this year. It would take a number of important steps to reduce costs, including authorizing price negotiation, allowing reimportation, prohibiting anti-competitive deals, strengthening penalties for fraud convictions, and increasing price transparency.
Authorizing Price Negotiation by HHS
The Prescription Drug Affordability Act would direct the Secretary of the Department of Health and Human Services (HHS) to negotiate Part D prices on behalf of its nearly 40 million beneficiaries. Allowing for price negotiation has substantial support from the public. According to a poll conducted by the Kaiser Family Foundation in August 2015, 83 percent favor a Medicare drug policy that allows HHS to negotiate prices with pharmaceutical companies.
If HHS were able to negotiate similar prices as those paid by Medicaid and the Veterans Health Administration, the Medicare program would save approximately $15 billion annually according to research published by Dr. Marc-Andre Gagnon of Carleton College’s School of Public Policy and Sidney Wolfe of the Public Citizen’s Health Research Group in 2015. If HHS were able to negotiate prices similar to those paid in other major industrialized nations, it would save as much as $541 billion over a decade, according to the Center for Economic and Policy Research in a 2013 report.
Allowing HHS, with its tremendous purchasing power, to negotiate prescription drug prices for the various private Medicare drug plans would likely save billions of dollars annually, resulting in substantive savings for Medicare’s 40 million Part D enrollees.
Allowing Prescription Drug Reimportation
The Prescription Drug Affordability Act would also legalize the reimportation of prescription drugs from licensed pharmacies in Canada. Data shows that in recent years, the United States has spent 40 percent more on prescription drugs per person than Canada has, and twice as much as the average industrialized country. Allowing individuals, pharmacists, and wholesalers to safely import prescription drugs from Canada would bring increased competition to the American market while improving access to affordable prescription drugs for Medicare beneficiaries.
In addition to the Prescription Drug Affordability Act, TSCL’s members support bipartisan legislation sponsored by Senator John McCain and Congresswoman Chellie Pingree that would allow individuals to import personal supplies of prescription drugs from approved pharmacies in Canada – the Safe and Affordable Drugs from Canada Act (S. 122, H.R. 2228). Both bills would allow American consumers to pay much less for the same exact prescriptions.
Prohibiting Pay-For-Delay Deals
The Prescription Drug Affordability Act would also prohibit pay-for-delay agreements, where brand-name manufacturers pay generic drug makers to delay the introduction of their product to the market. Such deals are entirely legal in the current prescription drug industry, and TSCL’s members believe Congress must act immediately to prohibit the anti-competitive practice.
According to the Federal Trade Commission (FTC), pay-for-delay deals currently cost consumers and taxpayers approximately $3.5 billion annually. In FY012, the FTC detected as many as 40 pay-for-delay deals, costing the American public more than $8 billion in that year alone. Putting an end to pay-for-delay deals would undoubtedly bring generic drugs to the market in a timelier manner, increasing access to more affordable medicines for consumers.
Penalizing Companies for Fraud Convictions
Several leading prescription drug companies have been convicted of civil or criminal fraud for violations related to anti-monopoly practices, kickbacks, and off-label promotion, among others. The fines they must pay are often considered to be the cost of doing business in the drug industry. Until the penalties for convictions are more severe, TSCL’s members fear drug manufacturers will continue to perform unethical business practices.
The Prescription Drug Affordability Act would strengthen penalties for companies convicted of civil or criminal fraud by terminating their remaining market exclusivity period. This would likely be a stronger financial incentive against unethical business practices than fines or sanctions. It would also bring much-needed competition to the market while holding companies accountable for defrauding the American people. TSCL’s members believe stronger penalties for fraud convictions are essential in ensuring access to more affordable prescription drugs.
Increasing Pricing and Cost Transparency
Additionally, TSCL’s members believe drug companies must be more transparent and accountable when setting costs. Many Americans perceive the recent steep cost increases of some specialty drugs as a form of rationing, where only the wealthiest individuals can afford them. TSCL believes Congress should no longer allow pharmaceutical companies to take advantage of taxpayer-funded programs like Medicare while putting millions of lives at risk.
The Prescription Drug Affordability Act would require companies to make public all information that affects pricing, including the costs of research and development and the revenues received from tax credits or grants. Companies would be required to report prices, profits, and sale information for every country in which the prescription drug is sold. By doing so, drug companies would no longer be capable of concealing the true costs of research and development for which they claim billions of dollars in tax credits. TSCL’s members feel increasing transparency is vital if the federal government truly hopes to stabilize the skyrocketing costs of prescription drugs, save lives, and improve the health of U.S. citizens.
TSCL’s 1.2 million members and supporters understand the critical role that the prescription drug industry plays in the healthcare system. They are aware that innovative, life-saving pharmaceuticals are costly to bring to market, and they take pride in the fact that a majority of them are developed right here in the United States.
However, they believe that corporate greed in the industry is currently going un-checked, resulting in intolerably steep and life-threatening price increases for consumers. TSCL’s members know that Congress can act to improve the system’s flaws, and they believe it is time for legislative action to occur. The Prescription Drug Affordability Act is a sensible solution that would lead to billions of dollars in savings for the federal government and better access to more affordable prescription drugs for the American public.
TSCL applauds the committee for its work on this important issue, and we thank Chairman Chaffetz and Ranking Member Cummings for the opportunity to submit a statement for the record. In the coming months, we look forward to working with Congress, the Administration, and other stakeholders in any way necessary to ensure prescription drug affordability.