CBO Says Health Reform Causes Drug Costs to Rise
Straight from Fox News: “Remember this promise made by President Barack Obama, back in October 2008, while campaigning in Newport News, VA?
Then the presidential contender, President Obama promised cheaper prescription drugs:
“First, we’ll take on them on, hold them accountable for the prices they charge..and then we’ll tell the pharmaceutical companies drug and insurance companies a, ‘thanks, but no thanks for overpriced drugs.’ Drugs that cost twice as much here as they do in Europe and Canada and Mexico. We’ll let Medicare negotiate for lower prices. We’ll stop drug companies from blocking generic drugs that are just as effective and far less expensive. We’ll allow the safe reimportation of low-cost drugs from countries like Canada.”
Course, that didn’t happen. And now a new analysis from the non-partisan Congressional Budget Office shows that health reform will actually let drug companies increase their prices for drugs that are purchased through Medicare.
All of this is yet another example of the confusion that will reign once health-care reform takes hold.
Click here to read the CBO’s letter, entitled “The Effect of the March Health Legislation on Prescription Drug Prices” addressed to Rep. Paul Ryan, the ranking Republican on the House Budget Committee.
Ryan had asked the CBO to analyze the possible effects of some provisions of the Patient Protection and Affordable Care Act (PPACA) .
The health reform bill forces drug companies to pay billions of dollars annually in new fees beginning in 2012. But companies typically pass those fees and/or taxes onto consumers through higher prices. CBO director Elmendorf makes note of that in the new report:
“The legislation also imposes an annual fee on manufacturers and importers of brand-name drugs CBO expects that the fee will probably increase the prices of drugs purchased through Medicare and the prices of newly introduced drugs purchased through Medicaid and other federal programs.”
For drugs covered by Medicare, the Affordable Care Act could raise prices purchased through Medicare and other programs by about 1%, Elmendorf estimates. For new drugs bought through Medicaid, the changes could increase prices paid by pharmacies by 4%, he says.
“That increase in prices would make,” the CBO says, “the costs faced by some beneficiaries slightly higher than they would be in the absence of those provisions.”
Also, provisions in the reform act will force manufacturers of brand-name drugs to provide new 50% discounts and rebates for drugs purchased through Medicare and Medicaid. The amounts of the discounts and rebates will be based on the prices of the drugs.
But since the amount of the discount is based on the price of the drugs, drug makers can simply jack up the underlying price. CBO director Doug Elmendorf says just that, that the CBO expects the drug makers will attempt to offset those discounts by increasing prices on drugs.
“Manufacturers thus have an incentive to raise those prices to offset the costs of providing the new discounts and rebates, although other forces will limit their ability to do so,” Elmendorf says, declining to fully spell out those other forces.
Also, since the reform bill “extends insurance coverage to people who would otherwise have been uninsured (more than 30 million non-elderly people by the second half of the decade, according to CBO’s estimates)..those expansions in coverage could affect drug prices,” Elmendorf says.
The CBO says that the law does attempt to rein in drug makers’ ability to raise prices on drugs that are already on the market.
The question is, will consumers then see a flood of supposedly “new” drugs that are just re-branded, re-formulations of drugs already on the market?
The CBO report adds to the growing pile of reports indicating that Americans will see their health care costs rise because of reform, despite what the Administration has been saying.
Insurance premiums are expected to increase because reform requires insurance companies, operating on slim, grocery store profit margins (3%) must now cover an estimated 32 million more individuals. While many Americans are for insuring the uninsured, the reform bill forces consumers to buy plans with more coverage than they may have wanted to take on or can pay for.
Another new report from the Dept. of Health & Human Services claims that the average Medicare beneficiary will save $3,500 a year in out-of-pocket health care costs under the Affordable Care Act.
However, in its attempt at keeping a positive face on reform, the report fails to report what will happen to the 11 million seniors who have private Medicare Advantage plans. The Medicare program’s chief actuary says those beneficiaries can expect to see their out-of-pocket costs steadily rise until 2017, to a high of $923 that year, before falling to $873 in 2019.
Already, the Government Accountability Office says Kathleen Sebelius, secretary of Health and Human Services, sent out a misleading mailer about health reform to Medicare recipients earlier this year.
In fact, according to the GAO, the brochure, which cost $18 million in taxpayer dollars to publish and emanated from the Centers for Medicare and Medicaid Services, presented a view of the health reform law that is “not universally shared,” that it “overstated the benefits” of health reform,” and that it failed to note the possibility of less generous Medicare benefits and higher costs.”