Pharmaceutical giants have been quick to tout their efforts to help the Trump administration rein in runaway drug prices, but behind the scenes the industry has been lobbying furiously to roll back recently mandated medicine discounts for U.S. seniors.
Drug companies are focusing lobbying efforts to use a lame-duck session of Congress to peel back a legislative loss they suffered this year, according to people familiar with the efforts. On the line for the drug industry is $1.9 billion next year, according to one estimate. Critics say the effort by the industry has the potential to increase costs for some of the most vulnerable and medically fragile Americans: seniors on Medicare.
Medicare covers most drug costs until a patient and their plan spend $3,750. Then, coverage drops off and doesn’t pick up again until a patient’s total out-of-pocket costs, including what drug companies pay in discounts, hit $5,000. That gap between coverage is known as the doughnut hole.
Almost 30% of U.S. seniors fell into the hole in 2014, according to data from the Medicare Payment Advisory Commission, and more are being affected as costs rise for drugs to treat conditions such as diabetes, arthritis and cancer.
To make the doughnut hole less onerous, drugmakers had been required to give a 50% discount on their products once seniors hit the spending threshold. A legislative change in February backed by both parties increased the industry discount to 70%.
That extra discount is what drugmakers want to roll back, claiming that it goes too far and that the drug industry is taking too much of the expense. The lame-duck session — in between the midterm elections Tuesday, when Democrats took the House of Representatives, but before they will actually be seated and take over in January — may be the pharmaceutical industry’s best, last chance.
Drugmakers are up against Democrats, who oppose rolling back the larger discounts, but may also struggle with the Trump administration, which has made lowering drug costs for consumers a policy priority.
In response, the industry has increased its muscle in Washington.
Giants such as Johnson & Johnson, Amgen Inc., AstraZeneca and Eli Lilly & Co. boosted spending on lobbying by 30% or more in the third quarter, according to an analysis of filings by Bloomberg News.
“We support reducing the manufacturer coverage gap rebate percentage,” Ruud Dobber, president of AstraZeneca U.S., said in a statement.
Johnson & Johnson spent $1.98 million during that period, more than twice its expenditure during the same period a year earlier, according to lobbying disclosures filed with Congress. The company said the increase was to pay dues to trade associations. Its disclosure forms listed “issues related to Medicare Part D,” as the prescription drug program is known, as a key policy it sought to influence.
Who should pay?
The drug industry has said it supports seniors paying less for drugs, just not at companies’ expense. “Closing the doughnut hole is a good thing,” said Juliet Johnson, a spokeswoman for Pharmaceutical Research and Manufacturers of America, or PhRMA. But the way it was done earlier this year “was wrong for seniors.”
“This was a rushed and ill-considered change,” the Biotechnology Industry Organization, which represents biotechnology companies, said in a statement. “We will continue to make the case to lawmakers in both parties for a fix.”
PhRMA wants insurers, whose share of drug costs was reduced in the new law, to foot more of the bill. Critics of the drug industry say that’s misguided.
“If you shift it back onto the plans, I’m only going to pay more in out-of-pocket or in premiums,” said David Mitchell, who runs the drug price advocacy group Patients for Affordable Drugs NOW. “Why would we revisit this? Why would we even be talking about this? Except that big pharma is unaccustomed to having things happen to it by congressional action that they do not like.”
The February increase to the doughnut hole discounts should put $1.3 billion back in seniors’ pockets in 2019, and $600 million more in government coffers, according to research and consulting firm Milliman.
Pharma companies have pushed lawmakers to rein the discount back to 63%. The industry tried to push for that change this year during negotiations about an opioid crisis relief package, prompting some critics to say they were seeking a bailout at a time when they were supposed to be addressing other problems.
Part of the argument over the discounts stems from a debate about the February law. After the law went into effect, the Congressional Budget Office found that it reduced spending by more than originally thought. Republicans have said they want to scale back that impact with a smaller discount, while Democrats have said doing so might unfairly harm seniors.
“Republicans are just desperate to get their multibillion-dollar giveaway to Big Pharma done before a Democratic majority takes over the House,” said Henry Connelly, a spokesman for Nancy Pelosi (D-San Francisco), the House minority leader.
Rep. Greg Walden (R-Ore.), who leads the House Energy and Commerce Committee, supports changing the doughnut hole, though he said the way it was done in February needs to be fixed.
“He hopes and expects there will be bipartisan support when members return to D.C.,” said Zach Hunter, Walden’s spokesman. The committee would be a starting place for legislative changes to the current law.
The pharmaceutical industry’s trade group has consistently been among the top-spending lobbying groups over the past decade. So far in 2018, PhRMA spent more than $20 million, according to the Center for Responsive Politics, and was the third-largest spender behind the U.S. Chamber of Commerce and National Assn. of Realtors.
AARP — the lobbying group that represents the interests of seniors — says it has been educating people about the way the new discounts will work, and has been making its push to ensure they remain in place.
“This was a real win for beneficiaries,” said Megan O’Reilly, director of the federal health and family team at AARP. “We need to protect that and not be rolling it back.”
Koons and Brody write for Bloomberg.