Plus, a new YouTube video on whether Biden is too old to be president.
I’m Isaac Saul, and this is Tangle: an independent, nonpartisan, subscriber-supported politics newsletter that summarizes the best arguments from across the political spectrum on the news of the day — then “my take.”
Today's read: 13 minutes.
Monday is Labor Day, and since our team observes bank holidays we'll be taking the day off. If you want to hear from us tomorrow, though, please remember that our 10,000+ Tangle members get Friday editions every week. Tomorrow, I'm going to be breaking down a two-minute clip of an interview I saw with a Republican candidate for president, and explaining how both the interviewer (the media) and the candidate (politicians) mislead viewers on cable television.
- Senate Minority Leader Mitch McConnell appeared to freeze while speaking at a press conference in Kentucky, the second such incident this summer. (The incident)
- A federal judge has ruled that Rudy Giuliani forfeited a defamation case brought by two election workers in Georgia by not providing requested records, thus losing the case by default. (The ruling)
- Hurricane Idalia moved through Florida's northern Gulf Coast yesterday, making landfall as a Category 3 storm. It hit the sparsely populated Big Bend region and drove significant storm surge into cities elsewhere in the south. (The storm)
- The Department of Health and Human Services recommended that the DEA reclassify marijuana as a lower-risk controlled substance, a first step in a shift in federal policy. (The recommendation)
- A fourth detainee at Fulton County jail in Atlanta died this month, while the Justice Department is investigating the jail for poor conditions and violence. (The death)
Medicare drug pricing. On Tuesday, the Biden administration named 10 drugs that will be subjected to the first-ever price negotiations by Medicare, the government's health program that covers 65 million Americans.
Brief explainer: Medicare is the health insurance program in America for people who are 65 and older, some younger people with disabilities, and some Americans with end-stage kidney disease. Medicare is split into three parts — hospital insurance, medical insurance, and prescription drug coverage, also known as Medicare D. Typically, patients have to pay some drug costs out of pocket, but this program helps people cover the prescription price of both generic and brand name drugs. In 2021, Medicare spent $378 billion on drugs.
In last year’s Inflation Reduction Act, Democrats included a measure that allowed Medicare to negotiate drug prices directly with pharmaceutical manufacturers for the first time ever. Under the law, Medicare can negotiate the prices of a certain number of drugs each year. The drugs are limited to those that the program spends the most on and that don't face competition from less expensive alternatives.
The Biden administration’s announcement on Tuesday of those 10 drugs was a major moment in the government's efforts to lower drug costs. In 2019, the US spent about double the amount that peer countries did on prescription drugs, per OECD data.
“We pay more for prescription drugs than any other economy in the world,” President Biden said in the announcement.
The list of drugs announced by the administration includes treatments for diabetes, heart disease, and cancer. Some of the drugs are taken by hundreds of thousands or millions of Americans and cost upwards of $500 a month, while other drugs are less common but much more expensive — sometimes costing more than $100,000 per year. Per the Wall Street Journal, the list includes:
- Eliquis, a blood thinner from Bristol-Myers Squibb and Pfizer
- Enbrel, an arthritis drug from Amgen
- Entresto, a cardiovascular drug from Novartis
- Farxiga, a diabetes drug from AstraZeneca
- Fiasp and NovoLog, versions of a diabetes treatment from Novo Nordisk
- Imbruvica, a blood cancer drug from Johnson & Johnson and AbbVie
- Januvia, a diabetes drug from Merck & Co.
- Jardiance, a diabetes drug from Eli Lilly and Boehringer Ingelheim
- Stelara, a psoriasis drug from Johnson & Johnson
- Xarelto, a blood thinner from Johnson & Johnson
The price changes would go into effect in 2026. Medicare could save $25 billion on the drugs by 2031, and an estimated $99 billion over 10 years. For patients, the price negotiations may not have as direct an impact on costs. However, Medicare plans to use the savings to cap annual out-of-pocket costs for patients at $2,000 starting in 2025. That means Medicare recipients who don’t use the drugs listed may still benefit from the savings.
With the list revealed, drug makers will have to sign an agreement to negotiate and submit data for Medicare to consider for its negotiated prices. Medicare will then offer its initial price on the selected drugs, and manufacturers can counter-bid or accept the offer after one month. However, the law allows Medicare to set final prices, and impose tax penalties of up to 95% of the drug company's U.S. sales if it does not negotiate or adhere to the government’s price. By September 2024, the prices of the newly announced drugs should be final.
Pharmaceutical companies and business trade groups are expected to challenge the constitutionality of the new drug pricing negotiating powers, arguing that it violates Eighth and Fifth Amendment prohibitions against excessive fines and the taking of private property without just compensation. Further, critics say, many of the drugs are already discounted and price negotiations will hurt these companies’ bottom lines, which will ultimately curb research into new drugs.
“Giving a single government agency the power to arbitrarily set the price of medicines with little accountability, oversight or input from patients and their doctors will have significant negative consequences long after this administration is gone,” The Pharmaceutical Research and Manufacturers of America said.
In a 2021 poll, KFF found that 83% of Americans support Medicare negotiating drug prices, including 95% of Democrats and 71% of Republicans, even after being presented with arguments from both parties on either side of the legislative debate.
Today, we're going to focus on the debate over how this policy will impact drug prices and how it will play out politically. We'll save the legal arguments for another day. As always, we're going to share some views from the left and right, then my take.
- Many commentators on the right and left agree that drug prices in America are a real problem, and in some cases out of control.
- There are also commentators on the left and right who suggest more focus should be put on the “middle men” in the supply chain.
- However, their solutions for how to solve the problem vary, and there is considerable disagreement on specifics, even within the left and right factions.
What the left is saying.
- The left agrees that prescription drug prices in America are out of control, and most believe Medicare should have a larger role in price negotiations.
- Many in support argue that the negotiations are smart policy and great politics.
- Others suggest that price controls won't address middle men, who are the real culprits.
In MSNBC, Zeeshan Aleem said this is good politics and good policy.
"The Biden administration took a big first step Tuesday toward reducing the cost of prescription drugs for tens of millions of Americans," Aleem wrote. "It’s good news for the public, and an exceptionally powerful asset for President Joe Biden as he makes his case for re-election." Prices could be reduced by 50%, saving the government nearly $100 billion over a decade. This should lower premiums and out-of-pocket spending for Medicare beneficiaries. "The list’s unveiling marks Biden’s most tangible step toward fulfilling his campaign pledge of lowering drug prices, and he’s already planning on making it a key part of his 2024 messaging.
"Lowering drug prices plays extraordinarily well across the political spectrum," Aleem noted, and huge majorities of Republicans and Democrats want the government to negotiate prices. Pharmaceutical companies are suing, and "it's unclear how those legal challenges will go… But at least for now, it's another case of his administration executing policies that are both substantively good and politically advantageous." It's also a "long overdue measure that would help bring the U.S. one step closer to its peer nations who use the government to regulate prices and protect their citizens from extortion."
In Forbes, Howard Gleckman said the pharmaceutical industry's argument that high prices are necessary is unconvincing.
"This isn’t like price controls where the government tells a supermarket how much it can charge for a banana. Most economists agree such efforts to cap market prices usually are doomed to fail," Gleckman said. "When it comes to drugs, the government agency, the Department of Health and Human Services, isn’t acting as a regulator. It is a consumer — and not just any consumer. It is by far the biggest purchaser of prescription drugs in the world... I imagine, for example, that Pfizer gets a pretty good deal from makers of the test tubes it purchases in bulk."
"PhRMA and its supporters say high U.S. drug prices are a major incentive to do the difficult work of drug research, which often results in failure. If we are not well compensated for the rare winners, they say, we’ll develop fewer drugs," Gleckman wrote. But "much cutting-edge, early-stage research is done by small startups, which bear the financial risk, not by Big Pharma. The large firms often acquire successful drugs (or even buy the companies that make them) and act more as marketers than researchers... Whatever the outcome of the industry’s legal claims, its economic argument against drug price negotiations is weak."
The Economist’s editors argued that healthcare costs are out of control, but believe price controls could miss the real culprits — the middlemen.
"The ban on negotiations was illogical, and allowing Medicare to bargain with drugmakers makes sense. Alas, the new rules are too heavy-handed, and could have damaging effects. One problem is that they have swung from one extreme to another. Officials will not so much be negotiating the price as setting it," they wrote. "Pharmaceutical firms are not earning vast excess profits, considering the risk of their investments… If they doubt that they will make a sufficient profit on their investments, they will spend less on finding new drugs. Sure enough, studies suggest that falling revenues hit research and development spending hard."
"The new rules will have further perverse consequences. Currently, it can be beneficial for a new drug to win its first approval for use by a small group of patients, such as those with rare or late-stage cancer, and after that to go through trials for diseases that affect more patients," they wrote. "But the new rules allow a fixed term of unregulated pricing that begins with the first drug approval. This encourages firms to seek treatments for the most lucrative diseases first." Regulators "would do better to pay more attention to the rest of the supply chain. The system is packed with opaque middlemen such as pharmacy benefit managers, many of which are making big rents."
What the right is saying.
- Many on the right agree that prescription prices are too high, but view the negotiations as price controls that will ultimately harm consumers.
- Some argue that this policy is going to create some very negative outcomes, including less innovation in the drug space, and call on targeting the middle men.
- Others suggest the policy could simply drive prices up for people on private insurance.
In The Boston Herald, Wolfgang Klietmann said this will hurt innovation.
"The problem with such a system is that it would diminish patient access to treatments. We only need to look at countries with drug price controls to see the effects. Overall, the European Union, South Korea, Japan, Canada, and Australia saw significantly fewer new treatments introduced over the last two decades than the United States," Klietmann said. "A study by health analytics firm Vital Transformation shows that piling the SMART Prices Act on top of the IRA’s drug policies would result in about 230 fewer new FDA-approved medicines and more than one million jobs lost over the next ten years."
"There are better ways legislators could tackle drug costs. For example, the middlemen known as pharmacy benefit managers (PBMs) make billions of dollars a year by negotiating rebates from drug makers in exchange for favorable treatment by insurance plans. This has had the perverse effect of pressuring drug companies to raise list prices in order to increase the size of rebates and therefore PBM revenue. Americans would benefit from legislation that targets these predatory practices. But enacting more price controls — before the first ones have even taken effect — would do far more harm than good to American patients and the future of medicine."
In Deseret News, Kelvyn Cullimore said Congress should look elsewhere to reduce the prices for consumers.
"These latest proposals would significantly increase and speed up the number of drugs subject to Medicare price controls under the Inflation Reduction Act, cutting by half the period from FDA approval to when price-setting kicks in. This is particularly concerning since the Inflation Reduction Act’s drug pricing provisions have yet to be fully implemented," Cullimore said. "Studies have already shown that the Inflation Reduction Act, in its current form, will hurt drug research and development, or R&D.”
"We all agree that Congress should explore measures that address the affordability and accessibility of drugs. But an in-depth review of price-setting proposals demonstrates that producing fewer medicines is not the right answer," Cullimore said. "Further, these policies fail to take into account the full scope of the real drivers of high out-of-pocket drug costs by including all players in the supply chain, such as pharmacy benefit managers and insurers. "
The Wall Street Journal editorial board said price controls mean "slower cures."
"The Inflation Reduction Act (IRA) is the worst legislation to pass Congress in many years, and its drug price controls are especially harmful," the board wrote. "Drug makers that don’t participate or reject the government’s price will incur a crippling daily excise tax that starts at 186% and eventually climbs to 1,900% of the drug’s daily revenues. This is extortion, not a negotiation." The problem is also being overstated: "Medicare spending on prescription drugs has grown less than for hospital and physician services in the last decade," and total out-of-pocket spending on prescription drugs in nominal dollars "is lower than it was in 2003 and accounted for only 1% of the $4.25 trillion the U.S. spent on healthcare in 2021."
"Competition from generics has held down drug prices. Yet the IRA will discourage investment in new generics and biosimilars because their manufacturers could later be undercut by government price controls on brand drugs," the board said. "That means Americans may end up paying more for prescription drugs thanks to the IRA." This will also give companies incentives to launch drugs at higher prices and raise those prices for the 218 million privately insured Americans.
Reminder: "My take" is a section where I give myself space to share my own personal opinion. If you have feedback, criticism, or compliments, don't unsubscribe. Write in by replying to this email, or leave a comment.
- It's really nice to be covering a policy issue for the first time in what feels like weeks.
- This one is very complicated, but I give kudos to Biden and the lawmakers who are trying to do something about these drug prices.
- Ultimately, I think a more moderate negotiating proposal paired with something to address the "middle men" problem would have been better.
After a couple weeks of covering political investigations, not-so-mysterious deaths, wildfires, and debates, it's nice to do some actual policy coverage. It's also nice to see some agreement: Like the vast majority of Americans and pundits, I believe the government should do more to bring down the cost of prescription drug prices, and I'm glad to see the Biden administration, Democrats, and a handful of Republicans getting behind some actual solutions.
I also think it's clear from reading these arguments that Medicare drug pricing is an extremely complicated issue — and anytime a policy like this changes, it's almost certain to produce unintended consequences.
That said, it seems to me that the best way for the government to implement a policy like this is threefold.
First, they should frame this as more of a baby step than a massive overhaul. After all, these initial negotiations will only apply to 10 drugs, and the drugs eligible for negotiations have to meet specific qualifications, like not having generic competition, having been on the market for a long time, and being a major cost for Medicare.
Second, if the drug prices actually come down, it could reduce health care costs in a cyclical way. When drugs are less expensive, more people take them — especially drugs for diabetes and blood thinners — which would make Medicare recipients healthier. Improving the health of these patients will reduce healthcare costs for the entire country, not just Medicare and its patients.
Third is a counterpoint. Even if you accept that this is heavy-handed policy, you could argue persuasively that this is what it takes to rein in Big Pharma. Put differently: After decades of Medicare being unable to negotiate drug prices at all, making Big Pharma into a victim of government overreach strains credulity. These companies are already gaming the patent system to block out competitors, and the examples of Big Pharma companies implementing unethical pricing practices that hurt consumers are numerous. The position we're in warrants decisive government action. At this point, it might even warrant government over-action.
The best arguments against this policy are pretty straightforwardly laid out above. For starters, this isn't really a "negotiation" in the traditional sense. It wasn’t right that Medicare couldn’t negotiate prices, but now we’ve effectively flipped it. Medicare will get to decide the prices, and these drug companies will have to deal with it — or face incredibly harsh penalties and the removal of their drugs from the program. "Price controls" is probably closer to an accurate description of what this is than "price negotiations."
Given that, there is pretty good research and real world data on the way price controls impact investment, and it's not good. One University of Chicago study estimated that the drug price controls would reduce R&D by $663 billion through 2039, with 135 fewer drugs approved. Each of those drugs could have the potential to save or dramatically improve thousands of people's lives, but would effectively be stymied.
Second is the "middle man" argument, which also appears "under what the left is saying" courtesy of the very slightly left-of-center Economist. I like the focus on the middle men because it doesn't just offer criticism of this policy, it offers another solution. In fact, House Republicans are already investigating how pharmacy-benefit managers (PBMs) negotiate drug prices and charge fees. Health insurers and employers hire PBMs to negotiate prices, and PBMs seek out rebates and discounts from Big Pharma in exchange for selecting their drugs for the programs. Even for huge pharmacy companies, failing to land these deals can do serious damage to the bottom line — giving PBMs a great deal of leverage in the process.
To me, a more holistic policy proposal may have packaged some kind of PBM reforms with Medicare price negotiations that were more negotiation and less "hostage taking," as the Wall Street Journal editorial board put it. Unfortunately, despite bipartisan interest in regulating PBMs, Congress doesn't seem to know exactly what it wants to do about them yet — which makes reining them in impossible. Biden and Democrats decided not to wait, and instead forged ahead with price negotiation legislation that's been in the works for years.
And it's hard to blame them, given the public interest in this kind of reform. It also appears to be one of the rare divides between Republican voters (who overwhelmingly want negotiations) and Republican pundits and legislators (who seem uniformly against it). Perhaps that is reflective of Big Pharma’s stranglehold on Congress and the corporate media. In any case, the state of play is politically advantageous for Biden.
Politics aside, I'm hopeful this works as the administration intends; but I can't honestly say after reading all these arguments I feel confident that it will.
In our latest YouTube video, I addressed questions about Biden's age, whether he should seek a second term, who could potentially replace him, and why any replacement is extremely unlikely.
Your questions, answered.
Q: Reading [this article], you talk about how Biden is maybe stretching/reinterpreting the law to enact this monument. I’m sure it has always happened but it seems this is happening a lot with Biden (I’m Canadian so don’t really know). But it makes me think, what does this stretch or reinterpretation do for the Republicans? How might this bite Democrats back when Republicans are back in power? And what are some examples of this in the past? And vice versa what are some Republican reinterpretations that came back to haunt them or help the Dems get what they wanted when they became in power?
— Emery from Regina, Canada
Tangle: Really good series of questions! As a quick recap, in our edition about the new national monument in Arizona, we discussed how President Biden was stretching the Antiquities Act beyond what it was intended to do. We referenced Tristan Justice explaining that Joe Biden is establishing quasi-National Parks that do not seem to, as the act requires, use "the smallest area compatible with the proper care and management of the objects to be protected." Biden has used the Antiquities Act to create or restore national monuments five times as president.
How could using this same logic benefit Republicans? Well, first and foremost, what is done with executive action can just as easily be undone — as President Trump did with Obama's monuments, and as Biden re-did when he took office. In general, Republicans seem to be more "pro-development" than Democrats, so I don't know if they'd want to use the same logic to extend protections of greater area in the same way that Obama and Biden have.
What I could see, though — and this is just speculation on my part — is Republicans side-stepping the federal land provision and observing existing mining contracts in the same way Biden did when he established the newest national monument. Since that monument is partially on tribal lands and non-contiguous, I could see Republicans using this logic and precedent to put protections around existing mining operations on tribal lands, and then grant exemptions for current contracts on that land, effectively protecting mining operations. I think that would be a giant electoral loser for Republicans and I doubt they'd want to do that — but I could see how they could make it work, in theory.
As for examples from the other way around, I'm sure our readers can help out, but the first thing that comes to mind is the Supreme Court's reversal of Roe v. Wade. The ruling was only possible through Republican court appointments, which many pundits believe led directly to their huge underperformance in the 2022 midterms.
Have a better example? Write in and let us know!
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Under the radar.
Despite so many Americans having doubts about K-12 education in the U.S., it turns out parents are actually pretty happy. New Gallup polling shows that while only 36% of U.S. adults are satisfied with the country's schools, 76% of parents say they feel good about their own kids' education. Since the pandemic hit, and education issues became central in the culture wars, the divide between parents’ first-hand experiences and the rest of the country has only grown. While the overall satisfaction with schools is the lowest it’s been since Gallup was polling the question in 1999, parent satisfaction is as high as it’s been for most of the last decade. Axios has the story.
- $1,126. The per capita prescribed medicine spending in the United States, the most of any OECD country.
- $825. The per capita prescribed medicine spending in Germany, the second-most of any OECD country.
- $552. The average per capita prescribed medicine spending in comparable countries.
- $164. The amount of that per capita medicine spending that is paid for out of pocket in the United States.
- $55. The amount of that per capita medicine spending that is paid for out of pocket in Germany.
- $373.7 million. The amount of money the pharmaceuticals and health products industry spent on lobbying in the United States in 2022, the most of any industry.
- One year ago today we asked if student debt cancellation was legal.
- The most clicked link in yesterday's newsletter was the story about wind-powered cargo ships.
- Enough already: 662 Tangle readers answered our poll asking if the investigation into Fani Willis's case is justifiable or will be valuable, with 52% of respondents saying the investigation is NEITHER justifiable nor valuable. 30% said it is justified but will NOT be valuable, 11% said it IS justifiable and will be valuable, and 3% said the investigation is NOT justifiable but will be valuable. 4% were unsure or had no opinion. "Who watches the watchmen watching the watchmen watching the men watching..." one respondent asked.
- Nothing to do with politics: Burning Man from space.
- Wanna help us out? Give us a review on the news credibility reviewal site, Credder!
- Take the poll. What do you think of the Medicare price negotiations? Let us know!
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One of the most common questions I get in Tangle is "can you do more international news?" or "what about a Tangle for Country X?" While we focus primarily on politics in the United States, I am thrilled that we have recently partnered with DailyChatter, an international news organization built in the same ethos as Tangle. DailyChatter has been plugging us to its readers and vice versa, and so far, the feedback from Tangle readers has been great. You can try it for 2 weeks for free, and it's just $29.95 a year after that. 84% of all users who try DailyChatter for free stick around after their trial. Sign up here.
Have a nice day.
Eight people were left stranded in a cable car in Pakistan for hours, after two of the three supporting cables snapped. A military helicopter originally came to attempt a rescue, but fading light and high winds allowed them to save only one individual. That’s when Sahib and Nasir Khan, with their experience running a cable car business, stepped up. The two brothers used a zipline to reach the cable car and help the five children and two adults who remained stranded inside back to solid ground, one at a time. “Today, the way these two young men carried out the rescue operation has made the whole nation proud of them,” said Javed Nasir, a local resident. Good News Network has the story.
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