Senate’s PACT Act will give relief to patients using insulin, but will not lower prescription drug prices
Contact: Stephanie Nakajima, Executive Director at Mass-Care (email@example.com or 617-297-8011);
Dr. Gerald Friedman, Professor of Economics at University of Massachusetts Amherst (firstname.lastname@example.org)
Boston - Mass-Care, the state’s largest single-payer health care organization, commends the Senate for passing An Act relative to Pharmaceutical Access, Costs and Transparency (PACT Act). However, Mass-Care Executive Director Stephanie Nakajima cautions that since the bill introduces no bulk prescription drug program or new regulations on pharmaceutical companies, it is therefore unlikely to have any significant impact on the high and rapidly increasing costs of prescription drugs.
The Massachusetts Medicare for All Act, H. 1267/S.766, would authorize the state to use its purchasing power to negotiate price discounts for prescription drugs and medical devices; bulk purchasing is an example of how this could be done.
Strong points of the PACT Act include requiring insurers to eliminate deductibles and coinsurance for insulin and capping co-pays for the drug at $25 per month. Proposed regulation of pharmacy benefit managers (PBMs), the middlemen of the drug industry who drive up prices for patients, pharmacies, and taxpayers, is also welcome.
However, nothing is done about the unit cost of insulin (or the cost of any other drug) paid by the insurance company, which means that reducing cost-sharing will not control costs but will lead insurers to redistribute those costs to all (including those reliant on insulin) through increased insurance premiums. Massachusetts already has the second highest health care costs per capita in the country, and while all areas of the health care sector continue to rise, pharmaceutical costs are rising much faster than both premiums and total health care spending. (1) Direct regulation of these prices is needed to address the root causes of our state’s sky-high healthcare bill, of which low-income patients bear a disproportionate burden. (2)
The PACT Act attempts to discourage further drug price hikes not through price regulation, but by a softer deterrent: if the cost of a drug rises above a certain level, the bill mandates that the legislature hold a hearing about the cost. To avoid a hearing, pharmaceutical companies will supposedly reduce the cost. It’s not clear that such a threat will be enough to convince drug makers to reduce their price; no precedent exists for that mechanism, especially at the state level.
The bill authorizes the Center for Health Information and Analysis (CHIA) to collect drug cost information from pharmaceutical manufacturers and PBMs and publish its findings. “While academics will use this data, and more transparency around health care pricing is always welcome, further study on the problem of high drug prices is unnecessary; drug manufacturers will charge whatever the market will bear, and every other developed country has already figured out how to keep drugs affordable for their residents through price setting and bulk purchasing”, says Gerald Friedman, Professor of Economics at the University of Massachusetts Amherst.
This is why Americans pay more than any other country, including Switzerland, for drugs. Fortunately, we don’t even need to look abroad for a working model of bulk purchasing; it’s done right here in the United States, at the Veterans Administration. The VA competitively negotiates prices directly with drug companies, purchasing drugs for about 6 million veterans at half the cost of prices in privatized Medicare Part D. In addition to forcing insurers to cover more costs for users of insulin, we could actually get more services for our collective dollar by bulk purchasing the drug - and all other pharmaceuticals - at a lower rate. With drug industry profits at a record high, this shouldn’t be controversial.
Introducing bulk purchasing of pharmaceuticals would be a step towards a Medicare for All system in the Commonwealth. It’s also the step that the Massachusetts legislature needs to take to bring real prescription drug cost relief to our residents.
The mission of Mass-Care: the Massachusetts Campaign for Single Payer Health Care is to establish a single payer health care system in Massachusetts so that all residents of the Commonwealth will have access to comprehensive, quality, affordable and equitable health care because it is basic to life and human dignity.
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- From CHIA’s annual report: Gross pharmacy spending totaled $10.7 billion in 2019, an increase of 7.2% from 2018 https://www.chiamass.gov/annual-report/
- 2021 Annual Health Care Cost Trends Report, Health Policy Commission 2021 https://www.mass.gov/doc/2021-health-care-cost-trends-report/download