Health Policy

Community Health Plans Are Serious: Support Major Federal Action to Reduce Rx Drug Costs


Equal treatment under the law. A foundational pillar of American life. Except when it comes to drug makers who benefit from favorable treatment by the federal government.

For far too long, prescription drug companies have profited immensely under a system that affords them monopolistic powers to set prices devoid of government or public scrutiny.

Even during the pandemic, while much of the economy took a beating, the pharmaceutical industry continued to benefit from the high prices they charge. In fact, 9 of the 10 biggest profit margins recorded last summer belonged to drug companies.

As the nation’s economy sputters back, Big Pharma continues to raise prices and block patient access to lower-cost alternatives. It is beyond time to tame the soaring prices of prescription drugs once and for all.

For years, health care players have skirted around concrete actions to truly impact drug prices. Efforts to cut costs for consumers have translated to higher costs for health plans, resulting in a cost shift instead of a cost reduction. We, as private, nonprofit insurers, believe in the ambition and innovation possible in a free market – but the  market has failed in this instance and it’s time for the government to take action.

That is why the Alliance of Community Health Plans (ACHP) is putting its support behind reforms that can make a real, lasting impact for consumers and the entire health system. For the first time, a national health care payer organization is stepping up and supporting pragmatic and progressive reforms that can truly begin to rein in the price of prescription drugs.

This includes backing the dramatic step to grant the Secretary of Health and Human Services the power to negotiate lower prices for the highest-priced medications for which there is no competition, in addition to other actions.

A new Kaiser Family Foundation study demonstrates why such a policy is sorely needed.

The 250 top-selling drugs, each with one manufacturer and no competitive products on the market, account for 60 percent of Medicare Part D spending. The top 50 selling drugs, also with one manufacturer each and no competitors, account for 80 percent of total Medicare Part B spending. This all amounts to increased costs to seniors and taxpayers.

Yet price negotiation alone will not solve the multi-faceted problem of exorbitant  drug costs.

Policymakers must also confront the lack of competition in the biopharmaceutical marketplace by aggressively pursuing bad actors who use our nation’s intellectual property laws to stifle competition. In what other industry would it be acceptable for big players to block the innovative upstarts from coming onto the market, even if it meant countless lives could be saved?

The social contract that once governed the trade-offs between the need for innovation and access to affordable medicines is fundamentally broken. A patent system meant to reward innovation has been weaponized to create insurmountable barriers that keep lower-cost therapies, such as biosimilars, out of the hands of consumers. Empowering the Federal Trade Commission to crack down on these efforts will give patients, doctors and health plans more therapeutic options to choose from that are safe, effective and cost less.

Congress must also require reporting when prices increase rapidly, a sensible  concept with wide bipartisan support. In addition, financial penalties on drug makers are necessary to deter the kind of unsustainable price hikes we have seen year after year, including amid a global pandemic.

Drug companies must also be prohibited from merely shifting costs to health plans, or from our public insurance programs to private health coverage.This is nothing but a shell game in the guise of consumer financial relief.

Finally, Medicare reforms, including an out-of-pocket cap for prescription drugs for seniors is an important and long-overdue consumer protection.

Some will argue that these reforms amount to an unprecedented intervention by the government in private health care markets. Not so.

For insurers and health care providers alike, the government not only regulates prices, but also mandates how dollars can be spent.

Health plans, for instance, must publicly justify rate increases and comply with strict federal requirements on how they allocate dollars between medical care and administrative costs.

The Affordable Care Act imposed these requirements on health plans to improve accountability and transparency; to ensure price increases were based on reasonable assumptions and solid evidence. The same rules should apply to drug companies. It’s just that simple.

Suggesting these reforms is not something we take lightly. We believe in the private sector’s ability to innovate and deliver high-value coverage and care. Government intervention shouldn’t be the first solution. It should be a last resort.

And that is where we find ourselves when it comes to inexplicably high drug prices. We as a country are desperate for change.

It’s time for our elected leaders to step in where the market has failed and exert some control over the runaway cost of prescription drugs. Failing to do so will cost all the rest of us dearly.

Ceci Connolly is the President and CEO Alliance of Community Health Plans 

2 replies »

  1. The weaponization of the patent system is way out of control. Humira is exhibit A. Should have had a generic competitor 5 years ago, but instead it costs $20 billion a year!

  2. Drug executives are LIARS. They say we need high prices to fund cutting edge R&D. See the link to Katie Porter’s Whiteboard lesson.

    We must remember that corporations are shielded from market reforms because politicians own stock in these companies, get their friends and relatives jobs there, and are politically funded by them.

    We live in a Kleptocracy.