State bill would curb drug costs, but who’s the real beneficiary?

According to the Milliman Medical Index, the pre-insurance cost of health care for the typical American family has more than tripled since the turn of the 21st century, rising from $8,414 in 2001 to $25,826 last year.

Popular targets of blame for unaffordable health care include global pharmaceutical giants known collectively as Big Pharma, along with biotech startups eager to cash in and real life villains like Martin Shkreli. Given that lineup, it’s easy to see why reducing drug prices is a major target for politicians.

Drug outlays account for just 16 percent of overall health care costs. However, they are rising the most rapidly, and are among the easiest to identify.

A group of Oregon legislators is championing a price-control measure proposed as a potential national model — House Bill 2387. Introduced by Rep Rob Nosse, D-Portland, it would require pharmaceutical firms to reimburse insurers for any “excess costs” associated with a drug.

The bill defines excess costs as those exceeding the so-called “foreign price cap” — the highest price paid for the drug in any developed country other than the U.S. If a cancer drug wholesaled for $10,000 per treatment, while the highest developed world price outside the U.S. ran $6,000, the manufacturer would have to reimburse insurers $4,000.

It sounds logical, right?

Except, there is nothing in the bill to ensure the savings are passed on to the consumer. The bill does nothing to reduce the cost for families or employers, only for insurers. 

It won’t shock you to learn, then, that the director of legislative affairs for Regence BlueCross BlueShield of Oregon was on hand for the bill’s introduction. 

A sibling bill was introduced to provide relief to pharmacy benefit managers, who are hired to negotiate drug prices on the behalf of insurers.

PBMs are far from just an administrative client. They wring billions of dollars in rebates from manufacturers.

But the PBMs also play a role in rising drug costs, as most of their dealings go undisclosed. That makes it difficult to exactly gauge the extent to which rebates are actually being passed on to the customer.

Put the puzzle pieces together and  check some campaign finance contributions. You’ll find these two bills don’t protect consumers from an “evil profiteer.” They simply take from the rich and give to the rich, creating loads of additional regulations in the process, all on the public’s dime.
That sounds like politics as usual to us.