FORBES:It’s Time For The Truth On The High Cost Of Drugs

Reposted from an opinion piece by Steve Forbes.

Make no mistake, our medicines, like everything else these days, cost far more than they should. Rather than acknowledging the actual causes of today’s income-sapping inflation and high drug prices, far-leftists, such as millionaire socialist Senator Bernie Sanders, indulge in diversionary political theater to mask Democratic policy failings.

Sanders’ favored form of demagogic diversionary theater is the CEO perp walk, whereby he marches business leaders to stand before his ironically named Senate HELP Committee and throws angry tirades devoid of facts at them in front of an accommodating media.

The upcoming hearing with the CEO of drugmaker Novo Nordisk, Lars Jørgensen, will likely be no different—unless other members of the committee and the media cast aside Sanders’ circus and instead focus on what actually drives up drug prices that U.S. seniors and the rest of the population pay.

First, some context. Generally speaking, prices for prescription drugs—unlike the costs of groceries, energy, rent and other daily necessities—have risen at a slower pace than the terrible inflation caused by President Biden’s and Vice President Kamala Harris’ economic policies. In fact, wholesale prices paid to drugmakers have largely gone down in recent years, which begs the question: Why have prices that patients pay through their insurance or other healthcare plans gone up so significantly?

At the center of the problem are pharmacy benefit managers (PBMs), three of which are owned by the biggest insurance companies and control 75% of the prescription drug market. These corporate middlemen stand between drugmakers and patients. They secretly command a drug-formulary-and-rebate system that exists only in the U.S. Thanks to an unjustifiable special exemption from federal antikickback-corruption laws granted by Congress, PBMs are allowed to pocket massive drug-pricing rebates—often 40% and higher—instead of passing on those savings directly to patients. This is why the difference between what a drugmaker is paid and what a patient pays at the pharmacy counter is so great.

In any other industry, the practices of some of these companies would be subject to federal prosecution and carry criminal penalties. Instead, the Biden-Harris White House and congressional Democrats chose to manipulate public anger over patients’ out-of-pocket costs to advance their unrelated political and policy priorities. They’re doing it by masking their massive green-energy spending plan as the Inflation Reduction Act (IRA), which passed two years ago, and marketing it as a drug-pricing and Medicare-reform bill.

The Democrats’ IRA not only left the PBMs’ unique exemption from federal anticorruption laws in place but also gave them a further financial windfall by extending it. Meanwhile, the vast majority of older Americans haven’t seen their out-of-pocket drug costs go down. Worse, instead of paying lower drug prices, they’ve seen Medicare drug plan premiums spike 20%- 120%.

After all, someone had to pay for the IRA’s diverting an estimated $260 billion in projected Medicare savings to unrelated projects. These include billions of dollars meant for Medicare instead going to tax credits for buyers of electric vehicles and solar panels, green-energy grants to favored corporations and massive new nonMedicare subsidies to big insurers.

Moreover, prior authorizations and access restrictions are on the rise. Up to 2 million seniors could be kicked off their current Part D plans because fewer choices are available as a direct result of the IRA.

What about the IRA’s promised savings resulting from giving the federal government the power to negotiate Medicare drug prices? The Biden-Harris Administration recently boasted that it had secured $1.5 billion in direct drug-cost savings for seniors. But that’s spread across 55 million-plus people in the Medicare program and doesn’t apply until 2026. As for the IRA’s capping seniors’ drug costs, it turns out the cap will benefit less than 6% of Medicare drug plan enrollees next year.

All this should be the focus of Senator Saunders’ hearing, but it won’t be. Instead, he’ll be attempting to villainize a unique European company (its largest shareholder is a charitable organization) that must grapple with America’s failed drug-pricing system. Novo Nordisk also spent billions of dollars in R&D to develop treatments for diabetes and obesity. Along with leading U.S. drugmakers, Novo Nordisk has helped spur competition in ways that can help drive down the costs of becoming healthier.

The Biden-Harris Administration’s key tool in controlling drug prices is threatening to penalize or strip the patents from innovators. This takes away any incentive for companies to invest in breakthrough treatments that will save future lives. In contrast, if the administration were to eliminate the PBMs’ special exemption from federal antikickback laws and ensure savings went directly to patients, as former President Trump tried to do, that would significantly lower Americans’ drug costs almost overnight. Instead of going along with Bernie Sanders’ bullying, Democrats and the media should insist on the enactment of this basic reform.