Groundwork, Vanderbilt Policy Accelerator Release Suite of Big Pharma Overhauls To Lower Prices of Life-Saving Medicine

Groundwork, Vanderbilt Policy Accelerator Release Suite of Big Pharma Overhauls To Lower Prices of Life-Saving Medicine

New policy blueprints target monopoly power and corporate loopholes that are driving up drug prices across the pharmaceutical supply chain 

Today, Groundwork Collaborative and the Vanderbilt Policy Accelerator (VPA) unveiled a pharmaceutical reform agenda aimed at bypassing the broken markets and regulatory systems that force Americans to pay the highest prescription drug prices in the world. Both proposals directly address the need for greater state involvement through the creation of public options to bring down prices for patients.

The first proposal, authored by Groundwork Policy Fellow Alejandro Molina and VPA Senior Fellow Dana Brown, calls for the creation of “AmericaRx,” a network of publicly-owned and -operated pharmaceutical manufacturing facilities, designed to serve as a public backstop against Big Pharma’s monopolistic practices and deliver affordable prescription drugs to patients.

The second proposal, written by Molina and VPA Senior Fellow Reed Showalter, makes the case for breaking the pharmaceutical benefit manager (PBM) cartel. In order to eliminate the middlemen and bring down costs, the authors urge regulators to create a public PBM which would operate under a transparent pricing model and be unleashed from the burden of chasing returns for wealthy shareholders at the expense of patients.

Together, the proposals would save Americans at least $4.6 billion and as much as $18 billion each year on prescription drugs. That breathing room could be life-saving: one in five insured Americans and seniors, including Medicare beneficiaries, report going without necessary prescriptions – skipping doses, delaying refills, or using someone else’s medication – because of cost. A majority of households report their top budget concern is whether they will be able to afford health care and majorities across partisan lines believe the federal government should use more of its tax revenue to decrease health care costs. The authors’ recommendations would considerably lower the cost of life-saving medications and protect the prescription drug supply chain to prevent shortages.

In the papers, the authors write:

“The United States is a global leader in pharmaceutical innovation… [y]et for millions of Americans, these advances remain out of reach due to the high cost of prescription drugs.”

“In sum, the U.S. pharmaceutical market is structurally incapable of delivering affordable, reliable access to essential medicines. Brand-name manufacturers exploit monopoly protections to set prices as high as the market will bear, while generic manufacturers routinely exit production of critical drugs when profits are too thin to justify staying…This is not a symbolic gesture or a parallel system. It is a practical restructuring of market power that restores public leverage, improves health outcomes, and reclaims pharmaceutical production as a tool of public purpose.”

Background

For generations, federal regulators have sat idly while the pharmaceutical industry lines its pockets on the backs of working families.

• Decades of unregulated vertical consolidation has ballooned the number of middlemen that demand a payout from each prescription drug transaction.
• Along with monopolies and oligopolies in the drug manufacturing industry, the powerful pharmaceutical lobby has managed to prevent meaningful competition, bend the existing law to its will, and dodge attempts at regulation.
• All of these factors have led Americans to pay more for prescription drugs than patients in any other peer nation. The National Institutes of Health estimates that Americans pay 2.78 times more for prescriptions than in comparable countries across brand name and generic drugs.

Public drug manufacturing would both lower costs for patients and keep drugs available for those who need them.

• Rather than deliver prescription drugs at accessible prices for patients, drug manufacturers prioritize shareholder value and increasing profits.
  • The pursuit of profit over all, abuse of intellectual property protections, and consolidation in the drug purchasing market work together to drive up prices for consumers.
• A public drug manufacturing option would both strengthen supply chains to eliminate drug shortages and rein in Big Pharma’s pricing power.
  • Regulators don’t even need to create a new playbook for public manufacturing. At points throughout history, Massachusetts, California, New York, and Michigan have all successfully implemented public manufacturing to fill a specific need in the markets, and the Department of Defense owns and operates its own production facility for vaccines and medicines used in research and development efforts.

Pharmacy benefit managers (PBMs) artificially inflate the cost of prescriptions to pad their margins. It’s time to cut out the middleman. 

• PBMs control key channels of the drug supply chain and have avoided regulation by pivoting to new methods of extraction.
  • Just three PBMs – CVS Caremark, Express Scripts, and OptumRx – control 80% of the market.
  • PBMs oversee which drugs are covered by major insurance plans, determine what patients pay out of pocket at the pharmacy, decide which pharmacies are in-network, influence premium levels for employers and unions, and even play a role in manufacturing.
  • To escape regulation, PBMs have moved key portions of their pricing negotiation infrastructure abroad.
• Attempts to bring down the cost of prescription drugs have failed to address the role PBMs play in driving up prices.
  • Regulators have been unable to keep up with PBMs’ ever-changing profiteering techniques, and governments and employers continue to pay significant sums to PBMs, leaving little incentive for market change.
• The federal government should partner with state governments to create a publicly accountable PBM alternative to strengthen transparency and affordability.
  • Evidence from state-level public benefit managers show that a public option works at scale: West Virginia, Ohio, Kentucky, and Indiana have all taken successful  steps to reform their state PBM practices.