Breaking Down the Pharma Price-Control Math In Harris' Home Care Proposal

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Usually, I put the caveats at the bottom of each section. But, today, I feel like I need to make this clear at the outset: I don’t think that the Kamala Harris proposal to add home care to Medicare, funded by additional pharmaceutical price controls, is a true priority for Harris. 

I don’t think any of this is meant to be considered literally, on the merits. It’s an expression of principles. And I respect that. I just don’t take it seriously. 

***

That said, Harris’ proposal signals what kind of thinking -- even if it’s not-ready-for-prime-time thinking -- is going to be acceptable for Democrats. And that thinking ought to concern industry. 

First, let me break down the numbers. Harris estimates that home care for seniors will cost around $40 billion a year. I don’t know that issue well enough to quibble (WaPo seems to think it’s a lowball number, but that’s a debate for someone else). I’m good to consider that the target. 

So where does $40 billion a year come from? 

Here’s what Harris says:

And then the Harris release goes on to say: “Experts at Stanford University have found similar proposals would generate significant savings.”

And there’s a link. The Stanford work is a white paper, pushed out earlier in the month. It’s not peer-reviewed, and it has the feeling of something built for the purpose of justifying exactly this kind of expenditure. 

So let’s assume that the Stanford white paper is a stand-in for how Harris wants to come up with $40 billion a year. The whole paper is worth a fisking, but that would try your patience. Instead, I want to focus on the big-money elements:

That’s only 100 words, but there’s a lot to unpack: 

1. The $450 billion, 10-year savings number is clearly designed to match with the $40 billion/year cost of home care. That’s my base assumption here. 

2. The $450 billion number comes from the CBO score of the-bill-formerly-known-as-HR-3, the 2019 effort to implement price controls. That was an idea that couldn’t even get universal Democratic support and had to be abandoned. Why? It was over-the-top extreme, allowing price controls at the moment of approval. It makes the 9- and 13-year reprieve baked into the IRA look positively generous. 

3. But -- remember -- the IRA is already a thing. CBO says the IRA itself will net the government $100 billion in savings. So those savings have already been “spent.” If you subtract that $100B from the $450B, there is no longer enough left to cover the additional spend on home care. PBM reform is probably not going to fill that hole. 

4. If the Stanford paper just said “We’re gonna do HR 3,” and left it at that, that would be one thing. It would be a bad thing, but it would be clear and straightforward. Instead, the white paper gets weird. 

5. The authors suggest increasing the number of meds eligible for negotiations to 30 from 20, predicting that will magically create around $50B to $100B in additional savings. That’s a bit absurd. The way the IRA is structured, the biggest meds are getting price-controlled first. Tacking on 10 lower-selling meds a year isn’t going to create that much additional juice. 

6. But Stanford has an answer: the government could “negotiate” bigger medicines if they move up the IRA timetable to 5 years/9 years. 

7. The big issue** here is that point #6 directly contradicts point #2: Stanford started their analysis with the HR 3 cost estimate. That’s not price controls at 9 years and 13 years, or even 5 years and 9 years. HR 3 meant instant price controls. Zero years and zero years. 

All of this has the slippery feeling of noodles in a bag. Are we talking about HR 3? A modification of the IRA that would allow for more medicines to be price-controlled? Along with a 5 years/9 years timetable? How many billions are we talking? What kind of impact would that have on development? 

The white paper doesn’t have answers. 

To be clear: any of these options would be significantly worse for industry than the status quo is. All of them would have an immediate and destructive effect on innovation. I’m not surprised that Harris didn’t address that element. She’s just looking for a way to pay for home care, and treating pharma like a piggybank is the easiest possible way to get the math to work. 

Still, the causal dismissal of the consequences provides a good reason to be nervous. After all, as NPC’s John O’Brien likes to say, if you keep cutting at the biopharma industry, sooner or later, you’ll hit an artery. 

This isn’t responsible policy. It is not serious policy. But it’s clear that industry is going to have to take it seriously anyway. 

** The almost-as-big issue is that continuing the disparity between small and large molecules perpetuates really inane incentives.

• The fight against copay accumulators -- the practice of forcing patients to pay deductibles by excluding patient assistance -- is mostly about awareness: anyone who learns about accumulators pretty quickly realizes that they’re a terrible policy idea. So I’m always happy when the word gets spread, e.g. this just-published oncologist-directed piece in the journal Cancer.

• I mentioned the efforts to get the “$2 generics in Medicare” pilot program yesterday, and CMS has since released a list of the 101 drugs it thinks should be included. It’s exactly the list you would have expected. 

• These 10 people are influencing Kamala Harris on health policy, per STAT. Other than Mark Cuban (and maybe Chiquita Brooks-LaSure), there’s zero about pharma or PBMs or insurers or hospitals or Medicare. Either that means all of those things are of secondary interest to Harris (possible!) or that the true influencers are staying out of the campaign fray (also possible!).

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