Sen. Elizabeth Warren (D-Mass.), a likely 2020 presidential candidate, will release a bill on Tuesday that would effectively create a government-run pharmaceutical manufacturer to mass-produce generic drugs and bring down prices, several sources in her office told POLITICO on Monday in an exclusive preview of the legislation.
The bill, dubbed the Affordable Drug Manufacturing Act, is unlikely to pass the Republican-led Senate, but it signals that a future Warren White House could try to radically revamp the federal government’s role in the pharmaceutical market in order try to lower prices.
“In market after market, competition is dying as a handful of giant companies spend millions to rig the rules, insulate themselves from accountability, and line their pockets at the expense of American families,” Warren said in a news release that her staff shared early.
Warren is one of several senators eyeing White House runs who have introduced bills targeting the pharmaceutical industry. Just last week, Sens. Jeff Merkley (D-Ore.), Kamala Harris (D-Calif.) and Amy Klobuchar (D.-Minn.) introduced the CURE High Drug Prices Act, which would allow the federal government to block price increases on certain drugs. Merkley put forward separate legislation, the Low Drug Prices Act, weeks earlier. And Sen. Bernie Sanders (I-Vt.) introduced his own bill, the Prescription Drug Price Relief Act, in November.
The flurry of bills suggests that the powerful pharmaceutical industry will be a major populist target during the Democratic presidential primary and possibly the general election, as millions of Americans struggle with rising health care costs.
President Donald Trump made drug pricing a big issue in his 2016 campaign, defying traditional conservative orthodoxy by endorsing government-centric solutions like federal negotiation of drug costs in Medicare. He’s continued to pursue populist ideas while in office, like a recent move to tie the cost of some expensive drugs to the lower prices paid overseas.
“I think the 2020 politics will keep weakening [pharma’s] stranglehold” on Washington, said Alex Lawson, executive director of Social Security Works, a left-leaning group that works to safeguard Social Security and is pushing drug-pricing reform. He said he believed that Democrats would continue competing to put out strong drug-pricing policy and that the issue would “become a litmus test for people who want to take on higher office.”
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Warren’s bill would establish an Office of Drug Manufacturing that would be required to manufacture at least 15 different generic drugs in its first year where the agency determines there is a failure in the market. The senator insists that this would be the government trying to repair the system, not a takeover.
“The solution here is not to replace markets, but to fix them,” she said in the news release.
There would be three standards for determining a “market failure”: if no company is producing the generic drug; if just one or two companies are making the drug and there is a shortage or a recent price hike higher than medical inflation; or if the drug is on the World Health Organization’s “essential medicine” list and the price is deemed too high while being produced by only one or two companies.
While the vast majority of prescriptions are for drugs whose patents have expired, Warren’s bill ultimately addresses only a small part of prescription-drug affordability. There have been some high-profile cases of huge price spikes in off-patent drugs, but the bulk of the country’s drug-cost problem rests with high-priced branded medicines.
The Association for Accessible Medicines, the generic-drug lobby, came out firmly against the legislation.
“When generics provide Americans with nine out of 10 of their prescriptions at only 23 percent of total spending on drugs, it is hard to fathom why anyone would call this system broken or insist that the government commandeer the business of developing, manufacturing and distributing these medicines,” the group told POLITICO. At best, it said, “this legislation is an unrealistic distraction from policies that would meaningfully reduce drug prices, such as combating patent abuse and cultivating a robust biosimilars market.” Like generics, biosimilars are cheaper versions of drugs known as biologics — which are often very expensive.
Warren’s team pointed to a recently disclosed investigation by several states into alleged price-fixing of at least 300 generic drugs and at 16 different companies as a sure sign that her policy is needed. Joseph Nielsen, an assistant attorney general and antitrust investigator in Connecticut who has been involved in the investigation, recently told The Washington Post: “This is most likely the largest cartel in the history of the United States.”
State attorneys general in New Mexico and Washington also opened investigations in 2017 into whether Eli Lilly conspired with other companies to drive up the price of insulin.
Insulin is a perfect test case for why an Office of Drug Manufacturing ought to exist, Warren’s team said. The drug is nearly a century old, yet the prices have skyrocketed in recent years. The cost tripled between 2002 and 2013, which is why Warren’s bill requires insulin to be one of the drugs manufactured by the federal government.
Warren wants production on drugs to begin a year after the law is enacted. But health policy experts caution that government manufacturing of generic medicines would be an enormous undertaking that could take years to establish. Still, the future bureaucratic hurdles may not deter Warren from campaigning on the issue in 2020.
“I think it would take a lot longer to build a factory and get it FDA-approved,” said Erin Fox, an expert on drug pricing and drug shortages at the University of Utah.
There’s also not a one-size-fits-all drug manufacturing plant, so different products would require different machinery. Even if the government could get production up and running fast, it would also have to land contracts with players in the drug supply chain, including wholesalers, pharmacy benefits managers and health insurance companies.
The law could also lead some generic companies to pull out of areas where products are already in short supply because these drugs tend to have lower profit margins.
“Whether that’s a good or bad thing could depend on how stable the government supply is,” Fox said.