Aug 8, 2019

How Democrats want to limit drug prices

Caitlin Owens, author of Vitals

Illustration: Rebecca Zisser/Axios

The Democratic presidential candidates' plans to lower drug prices are much more aggressive than what the party has supported in the past.

Between the lines: There are big differences among the candidates' platforms, but the entire debate has shifted to the left.

The big picture: Many of the candidates have moved beyond the party's traditional support of allowing Medicare to negotiate with drugmakers and importing drugs from Canada, embracing an even larger role for the federal government.

  • But what shape this role takes ranges from direct manufacturing to limiting price increases.

Government controls the drug: The most aggressive end of the spectrum involves having the government to manufacture drugs when they get too expensive or there's a shortage.

  • Sen. Elizabeth Warren has introduced a bill that would allow the government to manufacture generic drugs in some circumstances.
  • Andrew Yang supports a similar approach, and Mayor Pete Buttigieg recently told AARP that he "potentially" supports allowing the government to make generics.

Government seizes the patent for the drug: Other candidates stop short of having the government directly manufacture the drug, but would allow it to strip a drugmaker of its patent if it's too expensive.

  • Candidates with proposals falling in this bucket include Sen. Bernie Sanders, Sen. Kamala Harris, Sen. Cory Booker and former Rep. Beto O'Rourke.

Government determines the price of the drug: The U.S. doesn't regulate what drug manufacturers can charge for drugs, but some candidates want to start doing so.

  • Another enforcement mechanism endorsed by some candidates is taxing profits above a drug's allowed price at 100%. Harris has proposed the method in a component of her pricing plan, as has former Rep. John Delaney.

Reference pricing: One way to set a drug's price is based on what other countries pay, with penalties to the drug companies when we pay more.

  • This is part of Sanders', Harris', and Former Vice President Joe Biden's plans.

Value-based pricing: Another way that candidates want to determine a drug's price is based on its value, a method many other countries use but America doesn't.

  • Biden's plan also includes this method in some cases.

Government regulates price increases: Drug companies are currently free to raise their prices over time as much as they want to, as long as they can get insurers to agree to pay for them. Some candidates want to change that.

  • Biden's plan prohibits drug companies from raising their prices above inflation, and price increases above inflation are a trigger for price-setting in Harris' plan.

A sign of the times: The Trump administration relies on reference pricing in its proposal to limit what Medicare Part B pays for drugs, and a Senate committee just passed a bipartisan bill that would limit Medicare price increases.

The bottom line: The party's leftward drift corresponds with the the drug industry's evolution toward more complicated and thus more expensive drugs. But regardless, most of these ideas would be a huge change from the status quo.

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