This is part 1 in a series; read the second part, “At Least Half of Panel Advising Congress on Drug Policy Had Undisclosed Ties to Drug Makers.”
Here’s a Washington riddle:
What’s a legislative proposal originally touted as protecting cancer patients from greedy drug companies doing as part of the big infrastructure bill awaiting action by the House?
Answer: For all those cancer patients, nothing in particular.
This is a snapshot of one little-noticed provision in one of the most sweeping pieces of legislation lawmakers have tackled in years.
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Other than its impact on the math — in theory, it would save the government $3.2 billion over 10 years, thereby reducing the infrastructure bill’s overall price tag and its contribution to federal budget deficits — the provision has no obvious connection to the stated purpose of the legislation.
However, it involves issues of great consequence to ordinary people: the high cost of health care in general and prescription medicines in particular.
Under the provision, the government would reclaim money from drug companies. The savings would help offset the cost of the proposed infrastructure spending, and it could bolster the Medicare program’s finances. It would repay the government for allegedly unwarranted charges.
But the longstanding promise that the legislation would give older adults relief from out-of-pocket drug expenses seems to have fallen by the wayside.
The provision says nothing about reimbursing individual patients for their share of the alleged overcharges.
The legislative story begins in 2019, when Senator Dick Durbin (D-IL) publicized a bill he had co-sponsored.
As Durbin explained, drug companies have been charging customers — including Medicare, a federal health insurance program mainly for people 65 and older — for quantities of cancer drugs and other intravenous medicines that get thrown away.
These medicines can cost thousands of dollars per vial and tens of thousands of dollars for a course of treatment. They’re sold in single-dose vials. The amount administered is based on the patient’s size, and the unused portion must be discarded.
Drug companies have been selling the medicines in excessively large vials, charging for more than the average patient could use and profiting from the waste, Durbin said.
Senator Durbin: Pharma Fleece From Drug Vial Waste Must End
Durbin cited the example of Velcade, a cancer drug made by Takeda Pharmaceuticals. In 2016, in the United States, it was sold only in 3.5-milligram vials, enough for a 250-pound linebacker for the Chicago Bears, he said. In contrast, in Europe, the drug was available in 1-milligram vials, he said. In 2016, Takeda generated an estimated $309 million from discarded amounts of Velcade, including tens of millions of dollars from Medicare, Durbin said.
Given a chance to respond for this story, Takeda spokesperson Sara Noonan said by email that Takeda “partnered with the FDA to select the 3.5 mg size, ensuring that one vial of VELCADE will provide an adequate amount of the drug for a patient of almost any size.”
The issue of paying for discarded drugs extends to private health insurance plans and Medicaid, the state-federal health insurance program for people with low incomes, but Durbin focused on Medicare, a federal program mainly for people 65 and older. As Durbin noted, many Medicare beneficiaries must pay 20% of the cost of single-dose vials out of pocket through so-called coinsurance payments, a variation on copayments.
Medicare beneficiaries who face the full 20% coinsurance payments include those with traditional Medicare coverage who lack supplemental coverage, such as Medigap policies or employer-sponsored retirement benefits. That population numbered about 5.6 million in 2018, according to the Kaiser Family Foundation.
They tend to be the most financially insecure people on Medicare, Stacie Dusetzina, an associate professor of health policy and cancer research at Vanderbilt University, said in an interview with the Project On Government Oversight (POGO).
“Patients in America should not face higher drug costs because these pharma fleecers choose to sell their expensive cancer drugs in excessively large drug vials that necessarily are going to be wasted,” Durbin said on the Senate floor.
Durbin and Senator Rob Portman (R-OH) introduced a bill that would require drug companies to repay Medicare for the waste.
“We then provide a portion of that money back to seniors for the 20% coinsurance they have to pay for the drugs,” Durbin said.
The bill, called the REFUND Act of 2019, short for the Recovering Excessive Funds for Unused and Needless Drugs Act, included a clause that essentially said Medicare would collect coinsurance payments from patients based on only the amount of medicine actually used.
The REFUND Act provided “that the money recouped from the drug companies will go back to the benefit of these seniors,” Durbin emphasized on the Senate floor in 2019. “Under our new bill, this pharma fleecing from drug vial waste will soon come to an end, so that not just the patients but our government will save money.”
That didn’t happen.
Senator Chuck Grassley (R-IA), then chairman of the Senate Finance Committee, rolled part of the REFUND Act into a larger bill on drug pricing. The version he and Senator Ron Wyden (D-OR), then the committee’s ranking member, presented to the committee left out the part that would have spared Medicare beneficiaries from paying coinsurance for discarded medicine.
The Finance Committee approved the larger bill without the financial relief for individual patients. The bill was then sent to the full Senate, but it went no farther.
“In 2019, Medicare alone spent $753 million on medications that are literally thrown in the trash because the drugs are packaged in vials that hold too much medication for most patients,” the news release said.
“The bipartisan REFUND Act will stop this wasteful practice and save America’s seniors and taxpayers billions in prescription drug costs,” Durbin said in the news release.
The REFUND Act of 2021 resembled the original version but differed in at least one key respect: The clause about sparing Medicare beneficiaries from having to pay 20% of the cost of wasted medicine had again disappeared.
The news release didn’t explain how the new bill would save “America’s seniors” any money.
Spokespersons for Durbin, Grassley, and Wyden did not respond to inquiries for this story. A spokesperson for Portman said in an August 27 email that she was “trying to get you something shortly” but did not follow up.
Durbin is now majority whip, the No. 2 member of the Senate’s Democratic leadership.
POGO sought comment for this story from PhRMA and BIO, organizations that represent pharmaceutical and biotech companies. They did not respond.
The infrastructure bill is a centerpiece of President Joe Biden’s domestic policy agenda. It provides funding for highways, bridges, railroads, and broadband Internet service, among other programs. And, deep within its more than 2,700 pages, the Senate version’s Section 90004 would require makers of certain drugs dispensed in single-dose containers to pay refunds to the Department of Health and Human Services for discarded amounts.
More specifically, like its precursors, the bill says the refunds are to be deposited in the Supplementary Medical Insurance Trust Fund, a Medicare-related account.
The legislative provision closely tracks the REFUND Act of 2021. It says nothing about sharing the refunds with patients or reducing their coinsurance payments.
(It also carves out new exceptions for drugs “approved by the Food and Drug Administration on or after the date of enactment of this subsection and with respect to which payment has been made under this part for fewer than 18 months.” That would apparently exempt drugs approved in the future during their first 18 months on the market.)
While it would be best to extend the financial relief to Medicare beneficiaries, “it’s better to have the refunds flowing at least partially than not at all,” Dr. Peter B. Bach, director of Memorial Sloan Kettering’s Center for Health Policy and Outcomes and one of the researchers who documented spending on wasted medicine, told POGO.
The Congressional Budget Office has estimated that, from 2021 through 2031, the provision would decrease Medicare spending by $3.16 billion. That would offset some of the infrastructure bill’s red ink, making the massive piece of legislation appear somewhat less costly. (In the same August 9 analysis, the Congressional Budget Office estimated that the infrastructure legislation the Senate was preparing to take up would add $256 billion to budget deficits over the same period.)
The provision in the infrastructure bill defies recommendations of the National Academies of Sciences, Engineering, and Medicine, which studied the issue at government expense and at the behest of Congress.
In a report issued in February 2021, the National Academies said that, if refunds are mandated, they should go first to individual patients.
“In the event that legislation is enacted or regulatory action is taken to require rebates from manufacturers for discarded drugs,” the report said, “the U.S. Congress should require that rebates be directed first to cover the patient’s out-of-pocket expense for the discarded drug and thereafter to health care providers and payers.”
But the National Academies also made a case against requiring drug makers to pay refunds.
The report said that efforts to recoup the money could be futile.
Drug makers “may respond by increasing the price of individual vials so that the profit margins they realize from a particular drug remain approximately the same,” the report said.
“In the United States, drug manufacturers set their own prices and can simply adjust their prices to maintain their revenues in response to efforts to lower the expense of using drugs,” the report said.
What to make of the National Academies’ study is another question.
Kaiser Health News recently reported that the National Academies collected at least $10 million from major drug makers since 2015, including companies with a financial stake in the refund debate.
In addition, two members of the National Academies committee that prepared the report had financial ties to drug companies, Kaiser reported.
Nonetheless, if the National Academies is right, Medicare beneficiaries aren’t the only ones who will be left empty-handed.
If the National Academies is right, the mandated refunds by themselves won’t deliver the projected savings for the federal government, and the infrastructure bill will leave federal budget deficits that much larger.
Disclosure: Dusetzina, who is quoted in this article, has received grant money from Arnold Ventures, as has POGO. In May 2020, Arnold Ventures granted POGO $800,000 over 2 years to support strengthening federal inspectors general offices in their oversight of pandemic spending, including by creating a COVID-19 spending tracker. In December 2017, the Laura and John Arnold donor advised fund at Fidelity Charitable granted POGO $300,000 over one year to track relief spending after Hurricane Harvey. In November 2015, the Laura and John Arnold Foundation granted POGO $378,985 over two years to support stronger federal inspectors general processes to better detect and recover improper payments made by government agencies. Information on POGO funders can be found in the organization's annual reports. On its website, Arnold Ventures says it supports making prescription drugs and other therapies affordable and accessible for patients, employers, and taxpayers.