A new report finds some of politicians’ most popular proposals are likely to only have a single-digit impact on drug prices.
The report, compiled by the Congressional Budget Office (CBO), examined seven different policies that ranged from capping drug prices to bringing greater transparency to the market. Of the seven, the most effective would only likely reduce drug prices by 5%.
The news comes as Americans continue to pay nearly three times more than other wealthy, developed democracies – as the US is on track to spend $690bn on prescription drugs annually by 2031, and as a new blockbuster class of weight loss and diabetes medications has the potential to bankrupt the entire healthcare system.
However, to consumer advocates, what the report shows is not that controlling drug prices is impossible – but that lawmakers will need to employ multiple strategies that were studied, and then some.
“It’s not sufficient to pull on any one piece of the puzzle and not do the others,” said Steve Knievel, an access-to-medicines advocate with Public Citizen, a consumer rights group. “Policymakers can be bolder in their aspirations.”
The US paid 2.7 times more for all drugs in 2022 than other countries in the Organisation for Economic Co-operation and Development (OECD), and 3.2 times more for brand-name medications, the Rand Corporation found.
Those extraordinary prices have made their way into the national conversation as US politicians, such as Senator Bernie Sanders, have publicly excoriated executives for charging Americans more.
This disparity has gotten renewed attention in the era of new GLP-1 weight loss and diabetes drugs. The most popular drugs in this category are produced by the Danish pharmaceutical giant Novo Nordisk, and go by the brand names Wegovy (for weight loss) and Ozempic (for diabetes).
Wegovy has a list price of nearly $1,000 a month, far higher than the $155 a month Canadians pay and $59 a month cost to Germans. If even half of obese patients on Medicare and Medicaid took the drugs, the programs would be estimated to spend $166bn a year – nearly as much as they spent on all prescription drugs in 2022 ($175m). Together, Medicare and Medicaid insure low-income, disabled and older Americans, or more than 116 million Americans.
“The outrageously high cost of Ozempic, Wegovy and other prescription drugs is directly related to the broken, dysfunctional and cruel healthcare system in our country,” Sanders said in a hearing where he questioned the Nordisk CEO, Lars Fruergaard Jørgensen.
The new CBO report shows just how difficult it would be for politicians to enact policies to bring down drug prices, especially as pharma remains one of the most powerful lobbies in Washington. In 2023, 1,670 lobbyists spent $383m lobbying Congress for 564 clients, according to the Open Secrets database, which tracks money in politics.
“CBO is pointing out that the measures Congress has been proposing would probably be pretty limited in reach – but Congress could do a lot more,” Knievel said.
Peer countries pay less for drugs because they negotiate directly with drug companies, and, because governments in every other developed democracy provide their citizens with universal health coverage, they can act as gatekeepers – and that gives them leverage.
One of the most effective policies would peg US prescription drug prices to prices paid internationally or in a select number of peer countries – a process known as international reference pricing. That could reduce prices by about 5%.
For instance, a Democrat-backed international reference pricing proposal from 2019 would have required the secretary of the Department of Health and Human Services to negotiate select drug prices and pegged them in part to 120% of the average prices in six countries. That bill died in committee.
The Trump administration also signed an executive order to implement a kind of international reference pricing called a “most favored nations” clause. That would have required Medicare to pay drug companies the lowest price paid in similar countries for some expensive, physician-administered drugs. The Biden administration rescinded the proposal under pressure from hospitals and drug companies.
Kamala Harris supports expanded negotiations with drug companies through Medicare – a public insurance program that covers about 14% of the the US population, or 47 million Americans. Harris said she would use the savings to pay for a new at-home long-term care benefits through Medicare. However, the CBO found that, overall, such expanded negotiations would only result in 1% to 3% of reductions in drug prices overall.
Some strategies would not reduce drug prices and might even modestly increase them. The CBO found that importing drugs from other countries, such as Canada, increasing drug price transparency, banning direct-to-consumer drug advertising and introducing generic competition earlier would have minimal impacts on prices.
One-time Trump surrogate and the Republican Florida governor Ron DeSantis received Food and Drug Administration approval to import some drugs from Canada under the promise of reducing prices (and much to Canada’s chagrin). Republicans and consumer advocates have also pushed price transparency throughout the health system. At one point, the Trump administration even tried to force pharmaceutical companies to reveal the list price of drugs in direct-to-consumer advertising, but a court blocked the proposal in 2019.
“The CBO report doesn’t represent the full realm of proposals that have been on the table,” said Knievel. “But even the small percentages are still a lot of money and can amount to a lot for the people who use the prescription drugs that are impacted by the policies being discussed.”
