One of the goals of the Affordable Care Act was bringing down costs of healthcare beyond just giving millions of Americans a means to acquire “affordable health care insurance.” Part and parcel of the ACA was bringing down overall healthcare costs including those of Medicare through more streamlined administrative efforts and more affordable pharmaceuticals. Americans overall have called on the government to rein in the cost of prescription drugs for over a decade, and while Congress has done absolutely nothing, President Obama tasked the Centers for Medicaid & Medicare Services (CMMS) to come up with a plan to reduce the cost of prescription drugs by standing up to the powerful pharmaceutical industry. It is something Republicans oppose out of hand and Democrats are terrified of even trying.
This week, in opposition of the Obama Administration’s effort to reduce drug costs in Medicare, and after Republicans demanded that the CMMS put an immediate halt to reducing drug prices, House Democrats sent a letter requesting a slowdown to implementation of “a test” to cut drug costs. CMMS is nearly ready to start a trial run of the new rule that requires doctors and facilities providing outpatient services to use lower-cost, but just as effective, drug treatments.
The idea behind the proposed regulation is to fix the current system that not only overpays pharmaceutical companies for outrageously overpriced prescription drugs, it encourages and financially rewards physicians who use medicines that are the most expensive. Now doctors tend to use pharmaceuticals and procedures that are the most profitable to their bottom line instead of what is the most effective and appropriate for their patients.
The independent Medicare Payment Advisory Commission tasked with advising Congress on healthcare policy has been cautioning Congress about these unfair profit incentives since the Bush administration enacted them and has urged lawmakers to update the way drug prices are set to no avail. Since Congress is unable and unwilling to help reduce costs, President Obama stepped up and did what Congress refuses to do; reduce Medicare costs by reining in outrageously increasing prescription drug costs.
While the new rule will reduce Medicare drug costs, patients will still receive the same care. But for doctors, medical facilities and pharmaceutical sales the new rule will reduce , not entirely eliminate, the bonuses providers receive for pushing higher-cost drugs. It is why doctors, hospitals, and “Big Pharma” hate the new regulation’s test run. It cannot be emphasized enough that this new “test proposal” is to control costs; not the level of care because doctors and hospitals can still administer whatever treatment they deem necessary; they just will not profit from kickbacks for prescribing the most expensive drugs.
Under the new regulations, doctors and medical facilities will not be financially rewarded for prescribing the highest priced drugs or procedures as they are presently. Fundamentally, the only thing this new proposal will impact is the unwarranted “sales commission” of doctors and profits of the pharmaceutical industry. It will, however, finally put some much-needed “cost-efficiency” in the Medicare system by reining in prescription drug costs.
The Department of Health and Human Services “new rule” ends the unfair financial incentive doctors enjoy for prescribing extremely expensive medications. Patient advocates love the new rule while the pharmaceutical industry and medical community have been involved in an aggressive crusade to stop it.
As it works now according to a formula created during the W. Bush administration, physicians who purchase these medicines for use in their offices are paid the “average sales price” of the drugs plus an additional 6 percent “bonus.” The bonus is a reward to doctors and the pharmaceutical industry for prescribing the higher-priced drugs.
The Obama administration believes that doctors “marking up” drug costs by 6 percent as profit is too high and wants to cut the “prescription incentive” to just 2.5 percent plus a $16.80 fee per day. Many Americans might wonder why a doctor, hospital, or clinic is earning a “6 percent commission” for prescribing higher-cost, but no more effective, drugs that only increase Medicare costs. It is likely that many Americans believe doctors and medical facilities should not make any money for pushing certain pharmaceuticals no matter the cost.
According to one Democratic aide familiar with the entire controversy;
“The old system was really good for doctors — they got paid more if they prescribed really expensive drugs because they got a percentage of the cost of the drug. It doesn’t take a rocket scientist to figure out what they were doing. We’ve been trying to solve this problem for a while and the spike in drug costs has made it even more urgent.
The administration certainly went big and bold with this proposal but only a few specialties will really lose out. But those specialists are the ones who have been making tons of $ on a broken system. Is it their fault the system is broken? Of course not. Is it their fault that drug costs have gone up so much? No, but you didn’t see them complaining too much either.”
It is a different story now that there is a real plan on the table to cut their incentive to prescribe the most costly drugs to pad their wallets. In fact, besides complaining bitterly, there has been a significant lobbying effort and battle waged by the medical and pharmaceutical industry to maintain the status quo that Republicans agree should be kept in place. Throughout the ‘controversy’ of cutting Medicare prescription drug costs, congressional Democrats have been largely silent, but now they are weighing in and not necessarily in a good way.
The Democrats sent a letter to HHS to give them the opportunity to quickly answer some questions to allow the regulation to move forward, while the GOP wants it stopped cold. All of the back and forth between Democrats and Republicans is taking place amid the implicit Republican threat to attach a rider to legislation that would block the rule. House Minority Leader Pelosi’s alternate letter was an attempt to show there is division between the parties in how they want to “handle” the powerful pharmaceutical and medical lobbies.
Republicans constantly claim Medicare costs are too high, but when the President proposes a realistic plan they refuse to support it because it cuts into the medical and pharmaceutical industry’s profits. It is worth noting again that this new regulation has no effect on the quality of prescription drugs or treatment patients receive from their providers, but one notices that patient care or cost is never regarded whatsoever by the Republicans demanding the new regulation be scrapped.
It is likely the new regulation will continue facing strident opposition from the GOP but not necessarily because it reduces the cost of pharmaceuticals and Medicare. No, they will oppose it simply because it reduces the profit margin of one of their major campaign contributors.