Assessing blame for high drug prices

Assessing blame for high drug prices

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Americans’ spending on prescription drugs has soared over the past few years. Hillary Clinton has blamed “price gouging” by drug companies and called for more Washington control.

A far more likely culprit is actually Obamacare.

Obamacare was sold on the false promise that costs would come down if Americans gave Washington more control over their health care.

Instead, costs have soared in every aspect of health care, including prescription drugs. According to an April study by IMS Health, net spending on medicines has risen 21 percent since the health care law passed in 2010.

The reasons for this increase are complex, and no one factor can explain it all. However, Obamacare has contributed in several significant ways.

First, Obamacare imposed a $27 billion tax on manufacturers and importers of prescription medicine. Just like with every other tax increase, these costs are passed on to consumers.

This should not surprise anyone. The Congressional Budget Office (CBO) said before the law took effect that Obamacare would increase spending on drugs in several ways. In addition to the new tax, the law mandated discounts and rebates on prescription drugs in the Medicaid and Medicare programs. To offset these costs, CBO explained, drug manufacturers would have to raise prices.

While prices are increasing, insurance coverage is shrinking.

Almost all Obamacare silver plans – the most popular option on the government exchanges – have restricted the drugs they cover. If a drug is not on the approved list, patients may be left to pay the entire cost themselves. This includes many specialty drugs for chronic diseases like hepatitis C, cancer and rheumatoid arthritis.

Assessing blame for high drug prices
Assessing blame for high drug prices

Under Obamacare, consumers are paying more out of pocket for all medical care, including for prescription drugs. Premiums, co-pays and deductibles have jumped as insurance companies and employers shift more of the cost onto patients. Deductibles have risen about eight times faster than wages in the past 10 years.

Deductibles hit people on Obamacare plans especially hard. Half of all silver plans on the government exchanges have a deductible for prescription drugs. For a typical plan, the deductible is $2,000. In contrast, about 80 percent of people who get insurance through their job don’t have to meet any deductible when filling a prescription.

These deductibles mean that people in Obamacare plans pay a lot more out of pocket for prescriptions. A report last fall by Emory University researchers found that out-of-pocket expenses for drugs in a typical Obamacare silver plan are twice as high as they are in the average employer-sponsored plan.

A patient with high blood pressure could expect to see drug costs jump from $363 to $741 a year if switching from employer coverage to Obamacare.

When the direct cost to the patient goes up this dramatically, people tend to fill their prescriptions and take their medicines less frequently. For patients with chronic illnesses, this can mean higher costs down the road when their manageable condition gets worse.

It’s penny wise and pound foolish; and it’s the type of choice that President Obama said his health care law would end. Once again, the law had the exact opposite effect of what was promised.

Democrats don’t want to admit the ways the health care law has pushed costs higher. They prefer to stick to their talking points. Mrs. Clinton has blamed “predatory pricing” by drug companies. Certainly some unscrupulous drug companies have made headlines. The Senate Committee on Aging, chaired by Sen. Susan Collins, a Maine Republican, has spotlighted some of the worst abuses by companies like Valeant and Turing Pharmaceuticals. These are exceptions.

Mrs. Clinton’s solution to the high prices caused by Obamacare is to expand Obamacare. She wants to add more mandates, more regulations and more restrictions. As one Harvard expert told The New York Times last fall, Mrs. Clinton’s idea is “astonishingly naive.” Her proposals will not bring down costs. They will only take away incentives to develop new treatments and make health care more expensive.

The way to shrink health care costs is to give families more flexibility to find the coverage that fits their needs. We can encourage companies to produce new life-saving drugs at a price people can afford by cutting needless red tape. There are solutions that will truly reform America’s broken health care system. There are ways to give people the care they need, from a doctor they choose, at lower costs. Democrats are eager to dodge responsibility for rising drug costs. If they really want to know where the blame lies, they should start by looking at Obamacare.

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