Can the US Provide a Public Option for Prescription Drugs?

Can the US Provide a Public Option for Prescription Drugs?

Can the US Provide a Public Option for Prescription Drugs?

Patient advocates and health-care experts say the government can get into the generic pharmaceuticals business—and it wouldn’t even require a new law.


Five-year-old Aurora Pugh of Farmington, Minnesota, loves swimming and dancing. She also suffers from severe epilepsy. After spending months taking dance lessons, “Aurora slept through her first dance recital after an overnight seizure and we could not get her to wake up,” her mother, Lindsay Pugh, said. “As parents, that was a difficult moment.”

Aurora’s epilepsy diagnosis, Lindsay said, has “made us appreciate every moment more.” But the high costs of her medications have strained the family’s finances. Lindsay must always have a rescue medication—known as Diastat—on hand in case Aurora has a seizure that lasts longer than about three minutes, and that medication can cost her up to $560 for just two doses. Aurora has had as many as six seizures in a single week, so Lindsay has sometimes had to purchase Diastat five times in just a month.

There’s a generic version on the market, but that must be special-ordered and still costs Lindsay more than $250. “With epilepsy, it’s not okay to not have rescue medications on hand,” says Lindsay, “so we don’t always have the luxury of waiting.”

Aurora also takes a name-brand drug called Onfi to treat her seizures. Manufactured by a large multinational pharmaceutical company, Lundbeck, a month’s supply costs as much as $3,000 in the United States.

As Aurora’s medical bills piled up, her family scrambled to keep up with the costs. Their out-of-pocket costs totaled around $6,500 just for prescription drugs last year. And their financial situation grew more dire when Lindsay was laid off by her employer. The family cut back disposable spending to the bone to pay for Aurora’s prescriptions. They also raised over $700 by crowdfunding from family and friends to help pay for Aurora’s rescue medication.

But even that looked like it might not be enough to keep up with the costs of Aurora’s life-saving medication. Running out of ways to pay, the family prepared to take a mortgage out on their home. “We shouldn’t have to take out a loan to keep her alive,” Lindsay said, “but we will.”

The United States pays more for prescription drugs than any other comparable country in the world. The American prescription-drug cost crisis stems from the basic fact that the pharmaceutical industry has unchecked power to name whatever price it wants to take from the very people whose lives depend on its products. In economic jargon, that’s called “inelastic demand”—sky-high prices barely affect demand for drugs, because people simply need them to survive.

Without any countervailing pressure from government, pharmaceutical companies treat indulging in uncontrolled price hikes as nearly a God-given right. When Nostrum Laboratories raised the price of a single bottle of an essential antibiotic from $474.75 to $2,392, its chief executive, Nirmal Mulye, said, “I think it is a moral requirement to make money when you can…to sell the product for the highest price.”

The industry’s power is taking a devastating human toll. More and more families like the Pughs are resorting to crowdfunding from friends and strangers to cover the costs of routine medications. Cancer patients are delaying treatments and cutting pills in half because they can’t afford the out-of-pocket costs of their prescriptions.

Fortunately, there’s a readily available fix to this humanitarian crisis—if politicians are willing to use it. The federal government has the power to create a public option for cheaper generic versions of patented prescription drugs. And it doesn’t even need an act of Congress.

There are two ways for the government to bust up Pharma’s monopoly over life-saving medications. The first can be thought of as eminent domain for drugs. Pharmaceutical companies often abuse the patent system, as Emily Kopp of Kaiser Health News noted. “Pharma has taken bold steps to protect its monopolies on best-selling drugs,” she said. “Pharmaceutical companies will apply for dozens of patents on a single drug, for example. Drug makers have also taken advantage of an FDA pipeline meant for rare diseases in order to extend their market exclusivity on blockbusters.“

However, drug patents are not absolute. As a group of scholars pointed out in the Yale Journal of Law and Technology, federal law carves out an exception for the government to use or manufacture any product for which it has granted a patent, provided it gives reasonable compensation to the patent owner. That means government health-care programs could likely use or manufacture expensive patented drugs while paying pharmaceutical companies well below their current asking price.

That would effectively create a low-cost public option for prescription drugs. These government-facilitated generic drugs could be made available to anyone insured by a federal program, such as Medicare, Medicaid, and the VA (and arguably even Affordable Care Act marketplace plans and tax-subsidized employer-sponsored insurance, too).

In fact, the government might be able to cut drug prices just by thinking about creating a public alternative. The threat of that big stick might cajole drug companies to the bargaining table, suddenly willing to negotiate steep discounts on their products for use by government health programs. For instance, when the George W. Bush administration threatened to purchase generic versions of an antibiotic produced by Bayer during the anthrax scare in 2001, the company quickly agreed to cut the price of the drug almost by half.

The government could also leverage the massive amounts of money it invests in new-drug research. The pharmaceutical industry depends on a pipeline of research and development grants funded by taxpayers. In fact, every new drug approved by the FDA between 2010 and 2016 was developed with federal financial support.

With the government pumping so much money into research, there’s no reason it should be passively accepting eye-popping sticker prices for drugs. Indeed, a law on the books gives the government significant power to extract concessions from pharmaceutical companies. The Bayh-Dole Act of 1980 requires that any patented product developed with support from federal funds must be made available to the public on reasonable terms. If a pharmaceutical company charges an outlandish price, then the government can “march in” to license the drug and make it widely accessible.

Remarkably, the government has never invoked its right to challenge the price of a prescription drug invented using federal dollars. “In the nearly 40 years since Bayh-Dole was enacted, the government has never seen fit to use this provision,” said Peter S. Arno, director of health-policy research at the University of Massachusetts, Amherst. “Now might be a good time.”

Politicians agree that it’s time for government to provide a public alternative for low-cost drugs. Senator Elizabeth Warren (D-MA) told us, “Generic drugs can only drive down prescription prices if there’s real competition among multiple manufacturers. Public manufacturing is an important way to address existing market failures around generic drugs and deliver lower prices.”

“It says something very discouraging about us as a society when it costs Americans $20,000 a year for medication that prevents HIV, and the same medication goes for $100 a year in other countries,” New York City Council Speaker Corey Johnson said. “People who live with HIV and with other serious illnesses that cost thousands of dollars to treat should be outraged and moved to action. I have lived with HIV for the past 14 years, and I am outraged. This is simply not right. We need to change the patent laws in this country to allow for the generic production of medication. It will cost less and it will save lives.”

In the court of public opinion, the case for taking on Big Pharma is clear. For one, pharmaceutical companies are actually less popular with Republican voters than with Democrats. Kaiser Family Foundation polling finds that Republicans are more likely than Democrats to say that pharmaceutical companies have too much influence in Washington.

As Democrats wonder how to win back the voters they have lost in recent years, a public-minded policy on generic drugs presents a useful path forward. Polling by Data for Progress (full disclosure: McElwee is one of its founders), found that government production of generic drugs (even if it required revoking private pharmaceutical patents) has net support among Trump voters of +16 points (47 percent in support, 31 percent opposed).

In addition, Democrats have been seeking policies that could help them win back some of the Obama voters that swung to Trump in 2016. These voters tended to be disproportionately rural and without a college degree. Our polling suggests that generic pharma has net support of +37 (50 percent in support, 13 percent opposed) among whites with a high-school education or less. Among rural whites, net support was +36 (56 percent in support, 20 percent opposed).

Progressives have spent too much time trying to win voters with tweaks to the system—tweaks voters often don’t notice. It’s time for policies that directly affect their lives, policies people have a stake in, policies constituents will vote to defend.

Back in Minnesota, Lindsay Pugh hopes she won’t have to mortgage her home to pay for her daughter’s epilepsy medicine. She’s counting in part on the hope that a generic version of Onfi might hit the market soon. But even that might not be enough. “We aren’t sure what the new cost of Onfi will be if the generic does indeed come out by the end of the year,” Lindsay said.

In the meantime, Lindsay has become active in Little Lobbyists, a grassroots group that advocates for children with complex medical needs. She has spoken with her senator about the problem of high drug costs. “If the government were to take over the patent for Diastat or Onfi,” Lindsay said, “they would be able to control the costs, but they could also place regulations on drug companies forcing them to provide medication at an acceptable cost or capping the corporation’s profit margin.”

While a public option for generic drugs is a commonsense solution for voters, Big Pharma won’t go down without a fight. The pharmaceutical industry will inevitably threaten to spend less money developing new drugs. However, the government already funds most of the new pharmaceutical research anyway, while drug companies spend more of their own money marketing existing medications than they do developing new ones. And only so much of our country’s resources can be gobbled up by pharmaceutical research before the law of diminishing returns sets in.

But for millions of Americans who depend on prescription drugs to stay alive, this is a fight worth having. When an industry has ransom power over people’s lives and well-being, it has too much power, period.

Thank you for reading The Nation!

We hope you enjoyed the story you just read, just one of the many incisive, deeply reported articles we publish daily. Now more than ever, we need fearless journalism that moves the needle on important issues, uncovers malfeasance and corruption, and uplifts voices and perspectives that often go unheard in mainstream media.

Donate right now and help us hold the powerful accountable, shine a light on issues that would otherwise be swept under the rug, and build a more just and equitable future.

For nearly 160 years, The Nation has stood for truth, justice, and moral clarity. As a reader-supported publication, we are not beholden to the whims of advertisers or a corporate owner. But it does take financial resources to report on stories that may take weeks or months to investigate, thoroughly edit and fact-check articles, and get our stories to readers like you.

Donate today and stand with us for a better future. Thank you for being a supporter of independent journalism.

Thank you for your generosity.

Ad Policy