The Wall Street Journal reported that this week, more than three dozen drug companies have raised prices on generic and brand name drugs an average 6.3% – significantly higher than overall inflation.
On the dawn of the day Nancy Pelosi reestablished leadership of the Democratic-controlled House, I was reminded that one of her first post-election conferences included speculation that the Democrats would get together with Republicans to control drug prices. Controlling pharmaceutical costs, no doubt, has strong bipartisan support despite strong lobbying efforts on both sides of the aisle. I read a white paper published by Citizens for Responsibility and Ethics in Washington (CREW) which describes the power of the pharmaceutical lobby. 153 pharmaceutical companies spent over $2.5 billion over the last decade attempting to influence legislation impacting drug costs and distribution. And the biggest industry lobbyist, The Pharmaceutical Research and Manufacturers of America (PhRMA), ramped its 2017 budget up to $57 million.
Despite this enormous spending, I think the tide is finally turning on pharmacy prices. Surprisingly to many industry observers, Big Pharma lost a big battle in 2018. Medicare now requires pharmaceutical manufacturers to pay 70% (up from 50%) of the cost of the drug during the Medicare Part D donut hole period. This amounts to an estimated additional cost of almost $12 billion to that industry. Several drug companies have pledged to keep increases to once per year and hold them to under 10%. Pharmacy benefit managers Caremark (owned by CVS) and Express Scripts are now a part of integrated health insurers Aetna and Cigna. CVS has pledged to reimagine healthcare and Cigna has asserted that its Express Scripts unit would help them “maximize value, affordability, and choice for [their] customers and clients.”
I predict that 2019 is going to be a tough year for Pharma. Intense pressure on affordability of healthcare, low-hanging fruit for easy changes and bipartisan support for change are the ingredients for something big.