Drug Prices About to be Dramatically Lowered? How Democrats Plan to Make it Happen

• Author: William Asher
• Posted: 2024-09-08

It's no secret that one of the major burdens for Americans is the price of prescription drugs. In fact, over 70 companies across the country have increased their prices by 3.3% over the span of one year. Some of those companies increasing their prices include Pfizer, Sanofi, and GlaxoSmithKline, to name a few. Over the years, both Republicans and Democrats have promised to lower prescription prices with little to no results. So, why do Congressional Democrats signal that this year may be the year that change actually happens?

New Revenue Sources

Democrats currently hold the House, Senate, and the Presidency. All that is needed to create a plan that can be implemented and, most importantly, funded quickly. One of the biggest hurdles facing both parties included funding for bills that would help to reduce prescription drug prices. Because of President Biden's moves to increase the corporate tax rate as well as capital gains on the wealthiest of Americans, that funding is suddenly available.

Beyond Funding

Although the additional funding will provide new avenues for Democrats to explore, they are not placing all their confidence in it. Democrats will also use previous legislation such as the 2019 "Lower Drug Costs Now Act". The act allows Medicare to negotiate the price of prescription drugs with pharmaceutical firms. According to the Congressional Budget Office, this would save the country over $50 billion per year. Speaker Nancy Pelosi stated that including it is important for Democrats to include this language into current and future legislation as it would save half a trillion dollars over the course of a decade.

Is This Change Even Possible?

Although Democrats control Congress and the Presidency, the fight with the pharmaceutical lobby is not going to be an easy one. Over the years, Medicare has been the single biggest purchaser of prescription drugs. In fact, the Veterans Affairs and Defense Departments have spent billions on prescription drugs as well. That has led proponents to use the purchasing power of the government to demand lower prices, especially on drugs that have little to no competition. Using the "Lower Drug Costs Now Act", Medicare would be able to negotiate prices for up to 250 of the most purchased prescription drugs. Although drug makers are allowed to decline negotiation talks, they would at the risk of paying fees of up to 95% of their gross sales. That, of course, would make no sense in terms of wanting to make a promise.

How Much of a Discount is Possible?

According to the Congressional Budget Office, if negotiations were allowed to move forward, prices would likely be slashed by 57% to 75%. Gilead, a drug manufacturer that sells to Medicare three of the top 50 drugs at $9 billion, would see a massive hit to their revenue stream. Currently, pharmaceutical stocks have not been performing as well as some would have expected them to, mainly due to the uncertainly of how much their prices will change under President Biden. In addition, other departments such as the Food and Drug Administration are concern about the Biden administration making the approval of drugs that much more difficult. However, due to the need to rollout COVID-19 vaccines, that concern is, for the moment, not a major factor.

Big Pharma Not Going Down Without a Fight

The fact is that big pharma is not going to simply roll over for the Democrats who wish to cut their revenue in half. That is why they are currently the largest spenders when it comes to lobbyists in Washington. Much of their fight will involve the use of other senators such as Sen. Bob Menendez of New Jersey, where pharma giant Johnson & Johnson is located in. In addition, many pharmaceutical companies are attempting to paint their proponents in a bad light by claiming that all their actions are going to do is lead to is a slow down of production for medicine that would potentially save thousands of lives.

Consumer Savings

If Congress does allow Medicare to negotiate medicine prices, the savings will not be felt immediately by consumers. It's likely that Medicare and private insurance companies will see those savings first. However, as time goes by, regular people will begin to see a reduction in their insurance costs as their employers begin to save money as well.