Rx: Prescription Drugs Prices and the Two Party System

President expands on the middlemen target of late July executive order and exposes where House Democrats failed

Yesterday, President Trump visited Ohio and while many components of his trip overshadowed by Ohio Governor Mike DeWine testing positive for COVID-19 and being asymptomatic, the President showed why he’s the only one who can lead the nation out of many problems, especially the issue of lowering prescription drug prices.

Last month, the President signed four Executive Orders to lower prescription drug prices, having run out of patience with Congress, particularly the Republican controlled Senate.

As stated in the 7/26 McHenry County Blog article in commentary:

“Of all of the Executive Orders, the one dealing with the “middlemen” (first bulletpoint in HHS press release) is likely the most bold, because the President goes after a significant reason prescription drug prices are very high, in addition to reforms needed through Big Pharma, namely the pharmacy benefits managers (PBM), healthcare insurance providers and the rebates Big Pharma gives to PBMs and savings not passed along to consumers through the health insurance plans, including Medicare Part D.

Here is video excerpt from the President’s speech in Ohio yesterday, shared through Darlene Swaffar for Congress campaign, who’s running for the Republican nomination in FL-22 on August 18:

The House Democrats, including Congressman Sean Casten and Congresswoman Lauren Underwood, when they passed their “Elijah Cummings Lower Drug Costs Now Act”, or H.R. 3, back in December, only targeted one component of the prescription drug business model – the pharmaceutical manufacturers, or “Big Pharma”.

The President issued Executive Orders impacting Big Pharma last month, which met with their anger so much the executives refused to meet with the President though the Executive Order won’t take affect until later this year.

Here is the business model, as published in President Trump’s American Patients First in 2018:

With “drug manufacturer” representing Big Pharma on the bottom, the touchpoints with consumers, including insurance payers, pharmacies, and between payers and pharmacies, the PBMs.

With the implementation of Medicare Part D during the George W. Bush Administration, PBMs were the negotiators between Big Pharma and the insurance payers to insure the Medicare Part D private sector insurance plans negotiated the best price for consumers, without the federal government setting the prices of prescription drugs.

For example in Illinois for 2020, there are 10 payers for Medicare Part D prescription drugs (excluding complexity of Medicare Advantage programs). Those 10 payers, negotiating through PBMs, utilizing tools from the private sector like drug formulary through each payer’s plans, can bring the best possible price for medications, and the payers are reimbursed through Medicare.

Over the years, particularly with the implementation of the Affordable Care Act (ACA), the cost controls originally offered through Part D were eroded, and the President posed this question back in 2018:

“…PBMs exploited new utilization management tools and ‘price protection’ contracts to extract even higher rebates, further widening the gap between list and net prices. Each increase in list prices satisfied the drug industry’s need to grow revenue and increased administrative fees paid to PBMs, but also boosted the prices paid by payers and, especially, consumers.”

from page 15, American Patients First
.

So, if PBMs are clearly part of the problem, why did the House Democrats ignore their part in the reason American consumers pay high prices for prescription drugs when passing H.R. 3?

One reason is the consolidation of PBMs with pharmacies and health insurance plans. Many remember when PBM Caremark was acquired by CVS Pharmacy creating CVS Caremark PBM under the umbrella of CVS Health. In the past four years, CVS Health merged with Aetna. Similar mergers/consolidations have taken place in recent years.

But the biggest reason was days prior to Donald Trump’s inauguration in 2017, a new lobby was formed known as the Coalition for Affordable Prescription Drugs (CAPD) combining:

“…a diverse group of public and private employers, retirees, unions and the pharmacy benefit mangers (PBMs) they partner with to provide affordable, sustainable prescription drug coverage to their employees and members.”

Source: Coalition for Affordable Prescription Drugs web site, emphasis added
.

From the CAPD website, here is a view of the “diverse group” who are members of CAPD:

Source: CAPD Website

Highlighting a few, as stated above CVS Health is now merged with Aetna. UnitedHealth Group, another insurer which has its own PBM, indeed, most insurers have their own PBM including, according to Beckers Hospital Review:

  • UnitedHealth Group created Optima Rx PBM nearly 10 years ago and has acquired other PBMs in recent years
  • Anthem, originally contracted PBM services through Express Scripts, now has its IngenioRx in-house PBM, and cut ties with Express Scripts
  • Cigna, which merged with Express Scripts in the past four years
  • Humana, with its in-house PBM Humana Pharmacy Solutions

So the middlemen, primarily the PBMs have now become part of the larger mail service pharmacies and have joined with health insurance payers and combined with the traditional Democrat public service unions, CAPD is now a united opposition to Big Pharma and prescription drugs is now a 2-party system, with Democrats rallying around CAPD members (and no real reform included in H.R. 3 is proof), while traditional Republicans rally around Big Pharma.

Clearly, House Speaker Nancy Pelosi’s sole target is Big Pharma, while leaving her allies’ members within CAPD alone. H.R. 3 is proof.

And President Trump stands alone since he challenged “both parties” with his Executive Orders last month, much like the American people trying to make sense out of this healthcare two-party system which not only engulfs medications, but all parts of our healthcare system.

With the challenges of the COVID pandemic, a “new normal” emerges, but this “new normal” in healthcare has been developing over the past 10 years, and the only real long term solution for truly affordable drug prices must involve reforming all parts of the model, not just one part.

That is where the House Democrats failed last year with H.R. 3 and Senate Republicans failed to pass S. 2543, as challenged by the President at the State of the Union this year.

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