The Democrats’ drug pricing plan allows Medicare to negotiate prices. The plan is focused mainly on lowering the prices of drugs before having any kind of competition from the generic drug industry.
Undeniably, Americans need generic drugs and biosimilars. In fact, generics and biosimilars are the most effective way of saving the U.S. health care system. But at the same time, they keep competition healthy under the Democrats’ new drug pricing system.
The generic drug industry has warned that the Democrats’ plan would undercut their ability to compete against high-priced brand-name drugs.
The generic drug market is generally very effective at controlling costs and most drug-pricing outcry is focused on drugs without competition, according to Axios.
Benedic Ippolito, a senior fellow in economic policy studies at the American Enterprise Institute, told Axios, “Generally, I think there is some uncertainty about how proposed rate regulation will affect the generic and biosimilar markets.”
The Democrats passed the bill that will allow Medicare to negotiate drug prices without competition after they had been on the market for a certain period. It will also prevent pharma companies, which develop either brand or generic, from raising prices faster than inflation in Medicare as well as other health insurance companies.
The generic drug industry said these components are problematic.
Dan Leonard, President and CEO, Association for Accessible Medicines, wrote last month, “Biosimilar development could be forestalled for dozens of medicines. The overall effect would be more branded drugs maintaining their monopolies for longer. To be blunt, generics and biosimilars offer greater savings potential than this short-sighted policy change.”
It is clear that the Medicare negotiation could cut the competitive advantage of generics and biosimilars. In addition, limiting generic drug prices could also be harmful to the industry, as generic drug manufacturers generally have very low margins.
However, some experts are skeptical of the generic drug industry’s argument.
Loren Adler of the USC-Brookings Schaeffer Initiative for Health Policy said, “I can’t see why we’d expect anything to change since the post-competition market dynamics are the same as they are today.”
Larry Levitt, Executive Vice President for Health Policy, KFF, said, “The goal in reducing drug spending is to get more generics and biosimilars to the market faster, and generic manufacturers need to make money for that to happen. This is a matter of striking a balance between curbing egregious pricing practices and maintaining a profitable generic industry.”
