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After Obamacare, Democrats turn to prescription drug prices as health-care priority

If you want to understand why one of Hillary Clinton's first major policy proposals is to curb the price of prescription drugs, it helps to start with this chart.

(International Federation of Health Plans)

(International Federation of Health Plans)

The drug, Celebrex, is a common pain medication. The pill is the same, yellow and white stripped capsule whether its purchased by a Canadian or an American. The only difference is that Americans pay four times as much as their northern neighbors.

Clinton's plan to reduce drug prices is one of the most detailed policy plans she's released so far. It comes on the heels of a similar proposal from Vermont Sen. Bernie Sanders. And at it's core is a proposal to make American drug pricing policy more like Canada's, using similar strategies to get equally low drug prices.

Clinton proposes allowing Medicare to negotiate drug prices with pharmaceutical companies, a longtime dream for many Democrats (Obama has repeatedly proposed the idea in his annual budget). But drug companies are a powerful lobbying force in Washington and, for years now, the idea has essentially been dead upon arrival on Capitol Hill.

Democrats delivered on a key campaign promise — expanding health insurance access — in 2010. Now, prescription drugs are shaping up to be a marquee issue for Democrats in 2016. Here's why the Clinton plan is rolling out now, and how her proposals would work.

Drug prices are skyrocketing

American spending on drugs has more than doubled since 2000, rising from $121.2 billion then up to $271.1 billion in 2013, the most recent year for which data is available.

(American Hospital Association)

(American Hospital Association)

Pharmaceutical companies have especially high profit margins — not just for the health-care sector, but for any sector. Pfizer, one of the country's biggest drug companies, ran a 42 percent profit margin in 2013.

(BBC)

Some of these cases have been especially high profile, like cancer drugs that cost upwards of $100,000 or the new Hepatitis C cure that costs $1,000 per pill. Even just yesterday, one pharmaceutical company came under fire from raising the price of its drug from $13.50 to $750 — just because it could.

And consumers are footing a bigger part of the bill

So that's one side of the equation: drug prices are rising, and they're rising fast. But that's also been true for decades now. What makes the high costs a priority now is how much consumers are asked to chip in to cover those costs.

Data from the the Kaiser Family Foundation's annual survey of benefits shows that the percent of workers with a deductible over $2,000 has more than doubled since 2011.

(Kaiser Family Foundation)

(Kaiser Family Foundation)

It's not just drug costs rising — but consumers becoming more aware of the prices, as their employers ask them to foot an increasingly large chunk of their medical bills. Seventy-two percent of Americans currently say that drug prices here are unreasonable.

(Kaiser Family Foundation)

(Kaiser Family Foundation)

Clinton wants to make American drugs more like Canadian drugs

This all circles back to that very first chart, the one that shows how much a drug costs in the United States versus other countries. Clinton's biggest proposal is to allow Medicare to negotiate drug prices, much like all those other countries in that first chart do.

Right now Medicare is barred from this type of negotiation; so long as the Food and Drug Administration approves a treatment, Medicare has to cover it at the price demanded by the pharmaceutical company.

But other countries don't work that way. In Europe, Canada, and Australia, governments view the market for cures as essentially uncompetitive and set the price as part of a bureaucratic process — similar to how electricity or water are priced in regulated US utility markets.

Other countries do this for drugs and medical care — but not other products, like phones or cars — because of something fundamentally unique about medication: if consumers can't afford the product they could have worse odds of living. In some cases, they face quite certain odds of dying. So most governments have decided that keeping these products affordable is a good reason to introduce more government regulation.

The result is lower health-care prices. You see this for drug...

(International Federation of Health Plans)

...after drug....

(International Federation of Health Plans)

(International Federation of Health Plans)

...after drug.

(International Federation of Health Plans)

(International Federation of Health Plans)

And now Clinton, alongside other Democratic primary contenders, wants to see it in the United States, too.

Clinton will near certainly face opposition from the pharmaceutical industry, which has long-protested more government regulation of drug prices. The idea of Medicare negotiating prices came up at the beginning of Obamacare negotiations, but was quickly nixed in a bid to get drug companies on board with the health insurance expansion. Whether Clinton will have better luck calling out more recent examples of big drug price increases remains to be seen. But the issue is clearly in her line of vision, and one that Democrats are increasingly putting a spotlight on in 2016.