Congressional Democrats are on the verge of passing a nearly $1 trillion bipartisan infrastructure bill. They're also moving forward with a $3.5 trillion budget reconciliation package. Both will transform America for the better. The proposals would invest in everything from public transit to green energy to child care. Combined, they're arguably the boldest legislation since the New Deal, and lawmakers—as well as the Biden administration—deserve immense credit.
Naturally, lawmakers need to pay for this new spending. Senators have proposed delaying a Trump-era drug rebate rule, which is projected to cost the federal government almost $200 billion over a decade, until 2026 in the bipartisan bill. And my fellow Democrats in the House are considering repealing the rule entirely in the reconciliation bill.
Capturing those savings sounds tempting. But the rebate rule was one of the very few positive things to come out of the otherwise abysmal Donald Trump presidency. It will dramatically lower out-of-pocket costs for tens of millions of older adults and help them afford lifesaving expensive medicines. Lawmakers ought to find a different "pay-for."
Drug prices aren't set by pharmaceutical firms alone. They are the result of negotiations between pharmaceutical firms and insurance companies—who often outsource that haggling to specialists known as pharmacy benefit managers (PBMs). PBMs and insurers successfully negotiated more than $187 billion in discounts and rebates in 2020. That figure has been on the rise for years.
Right now, PBMs pocket a share of these discounts and pass along most of them to their clients, the insurance companies. Insurers book some of that money as profit, and use the rest to reduce premiums for all enrollees, healthy and sick alike. As a result, patient co-pays and co-insurance are based on the higher sticker price of medicines, rather than the considerably lower discounted price.
In effect, the status quo transfers money from the sickest, most vulnerable patients to insurers, PBMs and—to a lesser extent—healthy enrollees in insurance plans.
The rebate rule is poised to change this regressive wealth transfer. It stipulates that PBMs and insurers who sponsor Medicare drug plans must pass rebates and discounts directly to patients in the form of lower out-of-pocket drug costs. This rule change could save older adults as much as $83 billion at the pharmacy counter over a decade, according to one model, making it far easier for them to afford their medicines.
By making it easier for sick patients to actually fill their prescriptions, the rule could reduce overall health spending dramatically. By one estimate, patients' failure to adhere to their prescribed medication regimens costs our health system $289 billion annually. Non-adherence accounts for about 10 percent of hospitalizations and 125,000 annual deaths.
The insurance and PBM lobbies have been pushing for a full repeal of the rule since its inception. Democrats who care about making health care more affordable for older adults should not go along.
As a lifelong Democrat, I'm proud to see Congress on the verge of passing this historic legislation. I understand the need to pay for these critical investments. But there are other ways to fund much needed reforms—ways that don't make drugs even more expensive.
Howard Dean is the former chair of the Democratic National Committee and former governor of Vermont.
The views expressed in this article are the writer's own.
Uncommon Knowledge
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
