A new report shows that some of politicians’ most popular proposals are likely to have only a single impact on drug prices.
The report, compiled by the Congressional Budget Office (CBO), examined seven different policies, ranging from capping drug prices to bringing greater transparency to the marketplace. Of the seven, the most effective would likely reduce drug prices by only 5%.
The news comes as Americans continue to pay almost three times more than other wealthy, developed democracies – as the US is on track to spend $690 billion annually on prescription drugs by 2031, and as a new blockbuster class of weight loss and diabetes drugs has the potential to the entire health care system bankrupt.
For consumer advocates, however, the report shows not that controlling drug prices is impossible — but that lawmakers will need to use several studied strategies, and more.
“It is not enough to pick up one piece of the puzzle and not do the others,” said Steve Knievel, a drug access advocate at Public Citizen, a consumer rights group. “Policymakers can be braver in their ambitions.”
The U.S. paid 2.7 times more for all drugs than other Organization for Economic Co-operation and Development (OECD) countries in 2022, and 3.2 times more for brand-name drugs, the Rand Corporation found.
These extraordinary awards have made their way into the national conversation, just as American politicians, such as Senator Bernie Sanders, have done publicly denounced executives because they charge Americans more.
This disparity has received renewed attention in the era of new GLP-1 drugs for weight loss and diabetes. The most popular drugs in this category are produced by the Danish pharmaceutical giant Novo Nordisk and bear the brand names Wegovy (for weight loss) and Ozempic (for diabetes).
Wegovy has a list price of almost $1,000 per month, much higher than the $155 per month paid by Canadians and $59 per month by Germans. If even half of obese patients on Medicare and Medicaid were taking the drugs, the programs would spend an estimated $166 billion a year — almost as much as they spend on all prescription drugs in 2022 ($175 million). Together, Medicare and Medicaid insure low-income, disabled, and older Americans, or more than 116 million Americans.
“The outrageously high costs of Ozempic, Wegovy and other prescription drugs are directly linked to our country’s broken, dysfunctional and cruel health care system,” Sanders said in a hearing where he asked questions the CEO of Nordisk, Lars Fruergaard Jørgensen.
The new CBO report shows how difficult it would be for politicians to implement policies to lower drug prices, especially as the pharmaceutical industry remains one of the most powerful lobbies in Washington. In 2023, 1,670 lobbyists spent $383 million lobbying Congress on behalf of 564 clients, the report said. Open Secrets databasethat money follows in politics.
“CBO points out that the measures Congress has proposed would likely be fairly limited in scope – but Congress could do much more,” Knievel said.
Peer countries pay less for drugs because they negotiate directly with pharmaceutical companies, and because governments in every other developed democracy provide their citizens with universal health care coverage, they can act as gatekeepers—and that gives them influence.
One of the most effective policies would tie U.S. prescription drug prices to prices paid internationally or in a select number of comparable countries – a process known as international reference pricing. That could reduce prices by about 5%.
after newsletter promotion
For example, an international reference price proposal supported by Democrats from 2019 would have required the secretary of the Department of Health and Human Services to negotiate certain drug prices and peg them in part at 120% of average prices in six countries. That bill died in committee.
The Trump administration also signed an executive order to implement a type of international reference pricing called a “most favored nations” clause. That would have required Medicare to pay drug companies the lowest price paid in comparable countries for some expensive physician-administered drugs. The Biden administration withdrew the proposal under pressure from hospitals and pharmaceutical companies.
Kamala Harris supports expanded negotiations with pharmaceutical companies through Medicare – a public insurance program that covers about 14% of the U.S. population, or 47 million Americans. Harris said she would use the savings to pay for a new long-term care home benefit through Medicare. However, the CBO found that, overall, such extensive negotiations would only result in a 1% to 3% reduction in overall drug prices.
Some strategies would not reduce drug prices and might even increase them modestly. The CBO found that importing drugs from other countries such as Canada, increasing drug price transparency, banning direct-to-consumer drug advertising and introducing generic competition earlier would have minimal impact on prices.
One-time Trump surrogate and Republican Florida Governor Ron DeSantis received Approval from the Food and Drug Administration to import certain drugs from Canada under the promise of lowering prices (and much to Canada’s chagrin). Republicans and consumer advocates have also pushed price transparency throughout the healthcare system. At one point, the Trump administration even tried to force pharmaceutical companies to reveal the list price of drugs in direct-to-consumer advertisements, but a court blocked the proposal in 2019.
“The CBO report does not represent the full range of proposals on the table,” Knievel said. “But even the small percentages are still a lot of money and can yield a lot for the people who take the prescribed medications and who are affected by the policies being discussed.”