How the presidential candidates plan to rein in pharma costs

September 28, 2016

Find out where each presidential candidate stands on key issues related to pharmaceutical costs.

Although Clinton and Trump are significantly divided on many issues, they do have some commonalities when it comes to reducing pharmaceutical costs. For instance, they both support having Medicare negotiate lower drug prices. “Medicare has a lot of market power because a high proportion of healthcare purchases are made by people aged 65 and older,” says Peter Hilsenrath, PhD, Joseph M. Long Chair in Healthcare Management and professor of economics, University of the Pacific, Stockton, California. “This could bring down the cost of prescription drugs.”

HilsenrathSuch an initiative, however, would certainly have repercussions. “The pharmaceutical industry will claim that having Medicare negotiate drug prices will undermine research and development,” Hilsenrath says. He believes these claims may overstate the risk, however, because while large pharma firms manufacture and distribute drugs, they aren’t the actual powerhouses for research and development. Rather, a lot of this occurs at universities, for which the public is already spending a considerable amount, with funding from the National Institutes of Health and the National Science Foundation, says Hilsenrath. In addition, he says, smaller bio-tech firms-which are venture-capital funded, deliver much of the research in drug development.

But Joel W. Hay, PhD, professor of pharmaceutical economics and policy, Department of Health and Pharmaceutical Economics, School of Pharmacy, University of Southern California, Los Angeles, is already seeing the effects of lower monetary rewards for research and development. “There is only one antibiotic that can combat drug-resistant bacteria,” he says.

HayHay views having Medicare negotiate better pharmaceutical costs as a problematic solution to reining in pharma costs because under the current law such a tactic isn’t permissible. “The president would have to get the law changed for the Medicare Part D program in order for this to be possible; it’s not clear if Congress would go along with this proposal,” he says. “If Republicans still hold the House, it’s unlikely that they would allow it.”

Despite her position, Hay thinks if Clinton is elected it will be difficult for her to negotiate lower drug prices or lower drug company profits. “The pharma industry has strong lobbyists on Capitol Hill. If they feel directly attacked, which they will if Clinton tries to negotiate drug prices, that will be a huge battle for her,” he says. “It’s the classic case of a special interest group with lots of power that will fight fiercely if attacked.” The pharmaceutical industry would fight just as hard against Trump, if he went after them, Hay says.

Hay foresees another problem with having the government negotiate lower drug prices directly. “It’s very likely that pharma companies would respond by no longer allowing rebates and discounts for drug prices,” he says. That would probably lead to the elimination of rebates to Medicaid recipients, public health clinics, and other charitable organizations, resulting in worse access to drugs for those who are poor, sick, and vulnerable who lack good health insurance.

Next: Where they stand on importing drugs

 

 

Importing drugs

Both presidential candidates also support drug importation in an effort to lower pharmaceutical costs. According to Clinton’s official website, she supports allowing Americans to safely and securely import drugs for personal use from foreign nations that have high safety standards like the United States. The FDA and other regulatory agencies would need to set careful standards for re-importation to ensure safety and quality for Americans.

On his official website, Donald Trump calls for removing barriers to entry into free markets for drug providers that offer safe, reliable, and cheaper products. He believes allowing consumers access to imported, safe, and dependable drugs from overseas will give them more options.

If drug importation occurs, however, Hay believes it would cause drug manufacturers to eliminate discounts to other countries, rather than give up their large profits in the United States. “The net effect will be that countries such as Mexico and Canada will lose access to advanced medicines and be much worse off,” he says. “Drug manufacturers get the large majority of their global profits from sales in the United States, and they will not jeopardize that. American consumers will be no better off, since they will still be stuck with U.S. prices.”

BeckBut Adam Beck, JD, assistant professor of health insurance, The American College of Financial Services, Bryn Mawr, Pennsylvania, predicts more positive outcomes from drug importation. “Managed care systems will likely gain a great deal of bargaining power to purchase prescription drugs en masse from Canada and European countries at discounted rates,” he says. “The end result could be cost savings for both the managed care entity and the consumer. There may, however, be pressure on managed care providers to spend money on scrutiny, legal fees, and close inspection of drugs in ways that aren’t currently present.”

Hilsenrath says prescription drug importation should lower costs for insurers and put downward pressure on premiums for insurance beneficiaries. “There are concerns about quality, but these problems are not insurmountable,” he says. 

Next: Other stances

 

 

Clinton’s other ideas

Clinton plans to lower pharmaceutical costs in other ways, says Beck. “One way is to discourage direct-to-consumer advertising, which increases costs by banning corporate tax write-offs for advertising,” he says. “She has also advocated for capping annual out-of-pocket costs, to directly save consumers money and to allow for generic drugs to get on the market faster.”

Ultimately, Beck believes Clinton’s proposals would likely mean more drug companies could compete and prescribers would have greater freedom to prescribe their drug of choice. “Lower cost overhead could mean managed care organizations have greater flexibility to fund other aspects of care, leading to improved quality of care at lower costs,” he says.

Trump’s additional plans

Trump has stated that he’s in favor of expanding high-deductible consumer-driven plans. “His primary strategy is to allow the market to work better; consumers would become the judges of what works and what doesn’t,” Hilsenrath says, adding that he is reading into Trump’s philosophy since Trump is vague on specifics. “Such a plan would work for the majority of prescriptions, which are generic. But for expensive drugs, it’s uncertain what he has in mind.” 

Karen Appold is a medical writer in Lehigh Valley, Pennsylvania.