Factsheets

Hillary Clinton’s Plan for Lowering Prescription Drug Costs

Hillary Clinton believes we need to get incomes rising so American families can afford a middle class life. But too many American families and seniors are being squeezed by rising drug costs – even as they have seen their wages and incomes grow far too slowly for years. This is an issue that affects every American family and individual. Every month, 90 percent of seniors and around half of all Americans take a prescription drug. A typical senior on Medicare spends over $500 per year out of his or her own pocket on prescription drugs. And individuals with chronic health conditions or serious illnesses can spend thousands of dollars each year in out of pocket spending to afford their prescription drugs. The largest pharmaceutical companies are together earning $80-$90 billion per year in profits at higher margins than other industries, while charging Americans thousands of dollars for new drugs – often at much higher costs than in other developed nations. They’re receiving billions of dollars in taxpayer support for basic research, but spending more on marketing than R&D. Americans are having a hard time paying the bill. According to a Consumer Reports survey in August, “one of out every four people facing higher drug costs were also unable to afford medical bills or medications; one in five said they missed a payment on a major bill.”

Hillary Clinton believes we need to promote competition and leverage our nation’s bargaining power to lower drug costs on behalf of Americans. Hillary Clinton believes that we need to hold drug companies accountable to lower drug costs for Americans. And this isn’t a new fight for her. She fought against special interests for affordable health coverage in the 1990s and as a Senator. In her 2008 campaign, she called for allowing Medicare to negotiate with drug companies to reduce prices and rein in costs. She’s been committed to this fight throughout her career, and is continuing it today.

That’s why Hillary Clinton is announcing a plan to hold the pharmaceutical industry accountable and rein in drug costs for American families. Her plan will demand a stop to excessive profiteering and marketing by denying tax breaks for direct-to-consumer advertising and demanding that drug companies invest in R&D in exchange for taxpayer support – rather than marketing or excessive profits. She will encourage competition to get more generics on the market and create a Federal backstop for when there are excessively high-priced drugs that face no competition. And for Americans struggling with prescription drug cost burdens, she will cap what insurers can charge consumers in out-of-pocket costs, putting money back in the family wallet.

Hillary Clinton will demand a stop to excessive profiteering and marketing costs by encouraging innovation and new treatments from drug companies. Her plan will:

Stop direct-to-consumer drug company advertising subsidies, and reinvest funds in research.Almost every country in the industrialized world bans or severely restricts direct to consumer advertising because it increases prescription drug costs, and can include confusing, misleading or incomplete information or exaggerated claims if not regulated effectively. Clinton’s plan would eliminate corporate write-offs for direct-to-consumer advertising, saving the government billions of dollars over the next decade. She would use the proceeds to help invest in research, by devoting the funds to help pay for making permanent and simplifying the R&D tax credit. And going forward, Clinton’s plan would establish a mandatory FDA pre-clearance procedure for these ads funded through user-fees paid for by pharmaceutical manufacturers in order to be sure that the ads provide clear and understandable information to consumers.

Require drug companies that benefit from taxpayers’ support to invest in research, not marketing or profits. For years, Hillary Clinton has made the case that Americans should get the value they deserve for the billions of dollars in support they provide through federal investment in basic research and incentives for R&D. Drug companies should not be allowed to reap excessive profits or spend unreasonable amounts on marketing if they want to receive support that is designed to encourage life-saving and health-improving treatments. Clinton’s proposal would require pharmaceutical companies that benefit from federal support to invest a sufficient amount of their revenue in R&D, and if they do not meet targets, boost their investment or pay rebates to support basic research. If elected President, she will convene business leaders, experts on drug pricing, and consumer advocates to set new parameters for federal support in order to ensure this requirement. The basic principle is based on a provision of the Affordable Care Act that required insurance companies to pay rebates to consumers if their profits and administrative costs were an excessive share of benefits actually paid out to consumers.

Hillary Clinton will lower costs for Americans by limiting out-of-pocket spending, increasing competition, and demanding value for their purchase:

Cap monthly and annual out-of-pocket costs for prescription drugs to save patients with chronic or serious health conditions hundreds or thousands of dollars.Americans should be able to afford prescriptions for their conditions throughout the year, and not have to stop taking a needed medication. Following the example of states like California and Maine, Clinton’s plan will require health insurance plans to place a monthly limit of $250 on covered out-of-pocket prescription drug costs for individuals to provide financial relief for patients with chronic or serious health conditions, ensuring Americans can get the care their doctors prescribe. The cap would apply to prescriptions covered by insurance that are specifically approved by FDA for the treated condition. Up to a million Americans could benefit from this proposal every year.

Increase competition for prescription drugs, including specialty drugs, to drive down prices and give consumers more choices. Hillary Clinton’s plan will increase competition for traditional generics and generic versions of specialty drugs such as newer “biologics:”

  • Clear out the FDA generic backlog: Clinton’s plan will fully fund the FDA’s Office of Generic Drugs to clear out their multi-year generic drug approval backlog, which has kept competitors off the market, and can help lower overall prescription drug prices.
  • Increase competition for specialty drugs including new “biologic” drugs – which are often the most expensive new treatments: Specialty drugs, such as biologics, have provided new treatments and improved health for people suffering from chronic illnesses such as rheumatoid arthritis, Crohn’s disease, and multiple sclerosis, and people suffering from serious illnesses such as cancer. But often these drugs are the only ones on the market - and with no competition to keep the price down, drug companies can charge excessive prices. Clinton’s plan will increase competition for new treatments derived from biological sources by encouraging generic versions. Lowering the biologic exclusivity period from 12 to 7 years will spur greater competition and save up to $5 billion for the federal government over 10 years. This is especially important because biologics are often the most expensive new drugs, such as new heart disease treatments, which may cost $10,000 per year. The FDA should also give prioritized, expedited review to biosimilar applications that only have one or two competitors in the marketplace (situations where such drugs are most likely to be excessively priced).

Prohibit “pay for delay” arrangements that keep generic competition off the market. Hillary Clinton would prohibit “pay for delay” agreements that allow drug manufacturers to keep generic competition off of the market – lowering prices for Americans, and saving the government up to $10 billion.

Allow Americans to import drugs from abroad – with careful protections for safety and quality. Hillary Clinton believes that it’s unfair that drug companies charge far lower prices abroad for the same treatment, while imposing higher prices on Americans. Countries in Europe often pay half of what Americans pay for the same drugs. Clinton would allow Americans to safely and securely import drugs for personal use from foreign nations whose safety standards are a strong as those in the United States. The FDA and other regulatory agencies would set careful standards for re-importation to ensure safety and quality for Americans.

Ensure American consumers are getting value for their drugs. Clinton’s plan will ensure that new drugs coming on the market provide value and high quality to consumers, rather than adding to cost without improving treatments and outcomes. Clinton recognizes that new drugs can constitute incredible breakthroughs in treating diseases from Hepatitis C to cancer to heart disease – and we need to ensure that there are proper incentives for real innovations that bring effective products to market. Clinton believes that Americans should not face extreme costs, or pay too much for drugs that do not in actuality improve on available treatments. She has a long and strong record of supporting the evaluation of the value, quality, and comparative effectiveness of new drugs. That’s why she’ll build on provisions in the Affordable Care Act that invest in private research, and other private efforts, to use the results of private-sector analyses to hold drug companies accountable for justifying their costs and ensure Americans pay drug prices that reflect the improved value new treatments provide.

Hillary Clinton will leverage America’s negotiating power as a backstop.

Where competition alone isn’t enough to hold pharmaceutical companies accountable and drive prices down, Hillary Clinton’s plan would leverage America’s strong bargaining power to demand higher rebates and lower costs from drug companies. Her plan will:

Demand higher rebates for prescription drugs in Medicare. To contain the cost of prescription drugs for low-income individuals, people with disabilities, and seniors, Hillary Clinton’s plan will require drug manufacturers to provide rebates for low-income Medicare enrollees that are equivalent to rebates in the Medicaid program. Under current law, the rebates offered in the Medicaid program are more generous than those offered in Medicare. Hillary Clinton would require pharmaceutical companies to provide higher rebates in the Medicare low-income subsidy program, ensuring that rebates are at Medicaid levels. This would save more than $100 billion in Medicare costs.

Allow Medicare to negotiate drug and biologic prices.Hillary Clinton has long believed that Medicare should use its leverage with more than 40 million enrollees to negotiate and drive down drug and biologic prices for seniors and others in the program. Today, drug prices in Medicare are negotiated by a disparate set of benefit managers, rather than using the full bargaining power of the program. Clinton believes that we should drive the best bargain for Americans, and especially for senior citizens, by allowing Medicare to negotiate drug prices, notably for high-cost drugs with limited competition.