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The politics behind President Biden’s plan to lower prescription drug prices

August 14, 2021, 12:30 PM UTC

President Biden’s recent speech on prescription drugs was a forceful call for an aggressive program to cut prices. It’s an initiative he’ll continue to push hard.

Here’s what you need to know:

Why this speech now? The day before the speech, the Senate passed Biden’s $3.5 trillion budget plan by a 50-49 party-line vote. But the bill doesn’t authorize any spending, and getting this mammoth plan across the finish line won’t be easy. Biden’s speech reminded voters that he wants to cut government spending, not just increase it, and wants to do it in a way that saves them money. The only losers, as he tells it, would be drug companies.

Attacking drugmakers and drug costs is enormously popular. Biden was on solid ground when he said, “There aren’t a lot of things that almost all Americans can agree on. But I think it’s safe to say that all of us—whatever our background, our age, or where we live—can agree that prescription drug prices are outrageously expensive in America.” A Kaiser Family Foundation poll in 2019 found that 79% of U.S. adults believe “the cost of prescription drugs is unreasonable.” A separate KFF poll found that 72% believe that pharmaceutical companies “have too much influence in Washington.”

With the two parties adamantly opposed on Biden’s budget plan, drug prices offer a chance to embrace a strongly bipartisan issue. Majorities of Republicans and Democrats agree that both parties in Congress “are not doing enough to lower prescription drug costs” and that “there is not as much regulation as there should be when it comes to limiting the price of prescription drugs,” says KFF polling.

Was the speech’s central claim accurate? Biden’s claim that “in America, we pay the highest prescription drug costs of any developed nation in the world…about two to three times what other countries pay” is correct. A January report from the Rand Corporation research firm finds that U.S. prices average 2.56 times the prices in 32 developed nations.

But some details undercut Biden’s argument. The Rand report also finds that prices of generic drugs, which are 84% of drugs sold in the U.S. by volume, “are slightly lower in the U.S. than in most other nations.” Patient out-of-pocket spending on prescription drugs overall rose at an annual rate of only 1.6% in the five years up to 2019, the most recent year with available data, say the Centers for Medicare and Medicaid Services. That’s less than the rate of inflation. In KFF polling, 74% of Americans taking prescription drugs say “affording them is easy.”

Nonetheless, Biden is correct when he says some branded drugs for serious diseases have multiplied in price and now cost thousands of dollars a month. Consumers are terrified that they’ll need such a drug and their out-of-pocket cost will bankrupt them. It has happened to others. That, and not the averages, is why prescription drug costs are such a potent political issue.

Would Biden’s plan work? The two main elements of his plan are to let Medicare negotiate drug prices with manufacturers and to import prescription drugs from Canada. Current law prohibits Medicare from negotiating drug prices. A bill being considered in the House, H.R. 3, would require Medicare to negotiate prices of at least 50 branded drugs without generic competitors and make the negotiated price available to private payers as well. The Congressional Budget Office, analyzing a previous but similar version of the bill, estimated $450 billion of savings over 10 years.

Attempts to import drugs from Canada are already underway in line with rules adopted by the Trump administration. Those rules allow states, territories, and Native American tribes to design import programs that would have to be approved by the Secretary of Health and Human Services. Biden said in his speech, “I’ve ordered the FDA to work with states and tribes to import prescription drugs safely from Canada.” Several states have been developing programs—Florida, Vermont, Colorado, and Maine are furthest along—but no programs have been approved under either the Trump or Biden administrations.

The pharmaceutical industry is solidly against importation from Canada and has sued to stop it. But the public loves the idea. KFF polling shows that 75% of Republicans and 75% of Democrats favor it.

Such bipartisan fervor for action is why, even in a bitterly divided Washington, prescription drug price legislation has a decent chance of becoming law.

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