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Next president should attack drug prices, Obama says in JAMA

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(Bloomberg) — President Barack Obama has written a game plan on health care for the next president, including a crackdown on prescription drug prices that may cut pharmaceutical manufacturers’ profits if adopted.

In a first for a sitting president, the Journal of the American Medical Association published a scholarly article on Monday by “Barack Obama, J.D.” that examines the passage of his landmark health law, the Affordable Care Act, and proposes future improvements to the U.S. health care system. Obama wrote that a government-run insurance plan, the so-called “public option,” should be made available to Americans buying coverage in parts of the country where competition is limited, and that subsidies to reduce insurance premiums in Obamacare should be more generous.

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Despite the ACA, “too many Americans still strain to pay for their physician visits and prescriptions, cover their deductibles, or pay their monthly insurance bills; struggle to navigate a complex, sometimes bewildering system; and remain uninsured,” Obama wrote. “More work to reform the health care system is necessary.”

The article previews themes Obama will sound in the coming months, as he tries to shape the next phase of the long-running political battle over the appropriate role for government in the U.S. health care system, administration officials said.

The priorities Obama set in his article have strong support within his party. Presumptive Democratic presidential nominee Hillary Clinton and her rival in the presidential primaries, Sen. Bernie Sanders of Vermont, both called for the federal government to leverage its buying power to force lower prices from drug companies. Clinton also backs a public option for Obamacare in all states, and Sanders would go further, favoring a government-run universal health insurance program he calls “Medicare for all.”

Defense of Obamacare

In the article, Obama vigorously defended the ACA’s expansion of insurance coverage and said that “trends in health care costs and quality” under the law “have been promising.” About 20 million Americans have gained coverage since the law was enacted in 2010, he wrote, and average growth in spending per person in the Medicare program for the elderly and disabled “has actually been negative” from 2010 to 2014.

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Since the law took effect, the portion of nonelderly Americans unable to afford health care dropped 5.5 percentage points and the share describing themselves as in poor or fair health dropped 3.4 points, he wrote.

The article includes 68 citations and endnotes, though it was not formally peer-reviewed and JAMA published it as a “special communication.” It grew out of an appraisal of Obamacare’s implementation that Obama ordered late last year, said Kristie Canegallo, a deputy White House chief of staff. She said the goal was to “point future policy makers in the right direction” on health care.

Obama chose JAMA as a “serious” and “fact-driven” forum, Canegallo said.

‘High standards’

A group of senior editors at JAMA reviewed and critiqued the article and its factual claims, said Howard Bauchner, the journal’s editor-in chief. The article went through two formal revisions and additional editing over two months, he said.

“While we of course recognized the author is the president of the United States, JAMA has enormously high standards and we certainly expected the president to meet those standards,” Bauchner said in an interview.

The journal also published four editorials accompanying Obama’s article, including one by Obama’s first director of the Office of Management and Budget, Peter Orszag. “Fundamentally, the ACA is working,” he wrote.

Stuart Butler, a former official at the conservative Heritage Foundation who is now a researcher at the Brookings Institution, wrote that “some troubling trends in the ACA” had not been “adequately discussed” in Obama’s article.

One of the chief problems with the law, he said, is that premiums and out-of-pocket costs for insurance plans sold in government-run insurance exchanges are too costly, which has discouraged enrollment by people who earn too much money to qualify for subsidies.

“For many households, the president’s promise of affordable coverage rings hollow and has not been realized,” Butler wrote.

Drug prices

Describing work needed to improve the health law, Obama wrote that drug costs “remain a concern,” citing a 12 percent increase in prescription drug spending in 2014. He called for legislation to increase rebates drug manufacturers are required to provide to Medicaid and Medicare and to grant more authority to the federal government to negotiate prices on high-cost drugs.

The pharmaceutical industry has long fought any such proposals, and the 2003 law that created Medicare’s prescription drug benefit forbids the government from negotiating prices with drugmakers. The White House scaled back demands for concessions on drug prices in negotiations with the pharmaceutical industry when the Affordable Care Act was developed in 2009, in order to win drugmakers’ support for the law.

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“President Obama also uses misleading figures to lament the cost of prescription drugs, while saying little about insurance companies actively pushing sick patients off their plans by increasing cost-sharing to unfathomable levels or refusing to cover drugs that patients need until it’s almost too late,” Jim Greenwood, chief executive officer of Biotechnology Innovation Organization, an industry lobbying group, said in an e-mailed statement.

BIO has sought to shift the blame for health care costs to insurers, and has highlighted the value of new medications. Greenwood is a former Republican member of the House of Rep.s.

Obama called for a “public option” insurance plan in his 2008 presidential campaign and in his initial health plan as president but abandoned the idea as part of a compromise to build congressional support for the Affordable Care Act. The health insurance industry opposed the creation of a public option that would compete with their plans, and Obamacare customers today are limited to buying coverage from private insurers such as Anthem Inc., Aetna Inc. and Blue Cross Blue Shield companies.

Instead of a public option, the Affordable Care Act provided financing for 23 startup insurers called “co-ops.” More than half of them have failed.

Obama wrote that a public plan would provide consumers “more affordable options” on Obamacare’s insurance marketplaces, particularly for the 12 percent of customers who live in regions with only one or two participating insurers.

Updates with comment from industry group in 18th paragraph.

—With assistance from Caroline Chen.


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