Why Can't Congress Lower the Cost of Prescription Drugs?

Donald Trump promised to do it. Hillary Clinton promised to do it. Almost all Congressional candidates promise to do it. So, why can’t we pass legislation to lower prescription drug prices? Why do Americans pay so much more for pharmaceuticals than consumers in the rest of the world?

One reason may be the tremendous influence that pharmaceutical lobbying has on our legislators. A recent article by Kaiser Health News documents the tremendous scale of pharmaceutical industry cash in Congress. The article was published by Kaiser Health News on August 27, 2019 and is republished here with permission.

 PHARMA CASH TO CONGRESS

Pharma Cash Rolls Into Congress To Defend An Embattled Industry

By Emmarie Huetteman and Jay Hancock and Elizabeth Lucas  AUGUST 27, 2019

In the heat of the most ferocious battle over drug prices in years, pharmaceutical companies are showering U.S. senators with campaign cash as sweeping legislation heads toward the floor.

In the first six months of this year alone, political action committees run by employees of drug companies and their trade groups have given the 30 senators expected to run for reelection nearly $845,000, the latest update to Kaiser Health News’ “Pharma Cash to Congress” database shows. That hefty sum stands out with Election Day more than 14 months away.

Lowering drug prices is one of the rare causes that has united Democrats and Republicans, and at least one proposal that would change the way the industry does business could get a vote in Congress this year. One of the most promising and aggressive updates would cap drug prices under Medicare so they do not outpace inflation.

The number of big contributions and the lawmakers receiving them signal the industry is building loyalty as voters push candidates to talk about drug prices in the 2020 elections.

For the drug industry, the stakes are high.

“If the Senate flips” to Democrats, “then PhRMA’s probably going to have to double its budget,” said Kent Cooper, a former Federal Election Commission official who has tracked political money for decades, referring to the industry’s biggest lobbying group, the Pharmaceutical Research and Manufacturers of America.

Most of the biggest donations in the first half of 2019 have gone to Republicans, who control the Senate and tend to be more reluctant to restrict drugmakers. And even those who do not serve on committees that oversee the industry or represent states with significant industry ties have benefited from drugmaker cash this year.

“We support candidates from both political parties who support innovation and patient access to medicines,” said PhRMA spokeswoman Holly Campbell.

Several senators facing tough reelection campaigns have raked in tens of thousands of dollars this year, with some collecting much more than the industry has given them in the past decade, if ever.

“If it looks as though somebody is going to have a tough run — maybe a friend, maybe somebody you want to develop a better relationship with — you put some extra money in place,” said Steven Billet, a former AT&T lobbyist who teaches PAC management at George Washington University.

Thus far, senators running for reelection have together pulled in over $115,000 more than the 27 senators who were running for reelection in mid-2017.

The biggest single beneficiaries were Sens. Chris Coons, a Democrat from Delaware, and Thom Tillis, a North Carolina Republican, who took in a whopping $103,000 and $102,000 respectively in the first six months of the year. Tillis and Coons, the leaders of a Senate subcommittee on intellectual property, have been working on legislation to overhaul the patent system — perhaps the most powerful tool brand-name drugmakers have to keep prices, and profits, high.

Sen. John Cornyn (R-Texas) has been a vocal critic of the way some drugmakers use patents to extend their monopolies on drugs and block competitors, introducing a bill that would empower the government to sue drugmakers for gaming the system.

Cornyn, who faces a difficult reelection fight, received about $65,500.

Another top recipient was Sen. Cory Gardner of Colorado, who is considered the most vulnerable Republican up for reelection in 2020. John Hickenlooper, the state’s former governor who dropped out of the Democratic presidential primary on Aug. 15, has decided to challenge Gardner, further complicating his chances of being reelected.

Despite Gardner’s lack of pharma-related committee assignments, he received about $81,000 from drugmaker PACs this year, ranking him among the top 10 recipients of pharma cash in Congress. Another vulnerable Republican incumbent, Sen. Joni Ernst of Iowa, received about $35,500 — a huge bump for a lawmaker who, before this year, had collected about $15,000 total during her first term.

Sen. Gary Peters (D-Mich.) is also considered in danger as he runs for reelection in a state that voted for President Donald Trump in 2016. Like Gardner and Ernst, he does not serve on key committees, nor has he played a high-profile role in this year’s pushes on drug prices.

Peters received about $49,500 in campaign contributions from drugmaker PACs in the first half of the year, a personal record since being sworn in in 2015. Last year he received about $10,500 from drugmaker PACs in total.

Congressional leaders, who also help fund the campaigns of party members, are a common target of pharmaceutical industry contributions. And with Republicans controlling what legislation comes up in the Senate, Majority Leader Mitch McConnell, also running for reelection, has seen an uptick in donations: He received more than $85,000 during the first half of the year, a record for him over the course of the past eight years.

Drug maker PACs typically give to most members of Congress, regardless of party. But with Democrats pushing some of the most aggressive proposals to regulate drugmakers, the industry may stand to lose more ground should Democrats regain control of Congress — and political experts say that is a possibility. Democrats are likely to make drug prices a key campaign issue.

“While it may not be true at this very moment, it may well be true that the Democrats will have enough seats in play to really fight for the majority,” said Jennifer Duffy, a senior editor at the nonpartisan Cook Political Report. “I think it’s a tossup at this point.”

The 19 Senate Republicans running in 2020 collected an average of more than $32,500 each from the pharmaceutical industry, while the 11 Democrats collected an average of nearly $20,500 each.

Sen. Bill Cassidy, a Louisiana Republican who is a gastroenterologist by trade and has been active on health care issues, received about $76,000 from drugmaker PACs in the first half of the year despite the likelihood he will be reelected next year.

Pharmaceutical company PAC contributions are only part of the picture, though. Dollars from individual drug company employees may flow in the same direction, as well as “dark money” spending that often dwarfs what must be disclosed.

“The PAC contribution is a signal to other folks who are associated with the industry,” Billet said.

PhRMA gives hard-to-trace millions to American Action Network and other conservative groups that buy TV ads and robocalls and engage in other political advocacy.

Drug prices have been among Americans’ top concerns for years. Large, bipartisan majorities favor policies to control drug costs, including importing drugs from Canada and government negotiations to lower prices paid by Medicare.

Prescription prices remain far higher in the U.S. than in other wealthy countries. Prices for hospital medicines continue to rise. High-deductible health plans have increased the number of patients who feel the drug-price sting directly before insurance kicks in.

New therapies such as genetically altered immune cells to fight cancer, which can cost $1 million per treatment, threaten to renew the cost spiral.

The House also saw an uptick in donations from drug industry PACs during the first half of the year, with the Republican leader, Rep. Kevin McCarthy of California, and the top Republican on the House Energy and Commerce Committee, Rep. Greg Walden of Oregon, taking in the most. McCarthy received about $89,000, while Walden collected about $86,500.

Speaker Nancy Pelosi of California, the powerful Democrat who controls the House and is working on a plan to empower federal health officials to negotiate drug prices, took in about $12,500.

Kaiser Health News is a nonprofit news service covering health issues. It is an editorially independent program of the Kaiser Family Foundation, which is not affiliated with Kaiser Permanente.

Nursing Home Arbitration Agreements

The Federal Government has issued a final rule that limits the use of pre-dispute arbitration agreements between nursing facilities and their residents. The final rule was published on July 16, 2019 by the Centers for Medicare and Medicaid Services (CMS) the government agency that regulates Medicare and Medicaid program providers.

When someone is admitted to a long-term nursing facility there is a lot of paperwork to be signed. Along with the admission contract and various information forms and authorizations, most nursing facilities include an agreement that requires the resident to arbitrate disputes that may arise in the future.

Such pre-dispute binding arbitration agreements mean that disputes will be resolved by persons appointed as arbitrators according to arbitration rules.  By signing the agreement, the resident gives up his or her right to sue the facility in court in the event that the resident is, for example, harmed due to the negligence of the facility and its employees.

Lawyers for nursing home residents often feel that their clients will get better results from a court-lawsuit than from arbitration. And advocates point out that a better time to make an informed decision as to whether or not to arbitrate a dispute is after the dispute has arisen.

There is often great stress involved at the time of a nursing home admission and most people probably just sign all the forms they are handed, including the pre-dispute arbitration agreement, without reading them or understanding the implications. They may feel that they are required to sign all of the forms to get a loved-one admitted to the facility. It is not a good time to make a decision that will limit your future legal rights.

The CMS final rule allows long-term care facilities to continue to request that residents and their representatives agree to pre-dispute binding arbitration, but includes a few important safeguards that attempt to provide some measure of protection of a resident’s rights to make informed decisions.  

The new rule requires that the facility explain the arbitration agreement to residents and their representatives and advise them that they are not required to sign it and that their admission to and stay in the facility is not contingent on their signing it. I expect this requirement to be a point of litigation in the future. Lawyers trying to void an arbitration agreement that was signed by their injured client will seek to show that the facility failed to adequately explain it to the resident. 

The rule also specifies that the resident is given 30 calendar days to rescind the agreement.

In addition to advising their clients not to sign a pre-dispute arbitration agreement, elder law attorneys may want to recommend that clients meet with the lawyer within the first 30 calendar days after any nursing home admission. If an arbitration agreement was signed, the lawyer can help the client make certain that it is properly rescinded. 

The new rule takes effect on September 16, 2019.

Here are the specific provisions of the new rule:

  

2.Section 483.70 is amended by revising paragraph (n) to read as follows:

§ 483.70

Administration.

*****

(n) Binding arbitration agreements. If a facility chooses to ask a resident or his or her representative to enter into an agreement for binding arbitration, the facility must comply with all of the requirements in this section.

(1) The facility must not require any resident or his or her representative to sign an agreement for binding arbitration as a condition of admission to, or as a requirement to continue to receive care at, the facility and must explicitly inform the resident or his or her representative of his or her right not to sign the agreement as a condition of admission to, or as a requirement to continue to receive care at, the facility.

(2) The facility must ensure that:

(i) The agreement is explained to the resident and his or her representative in a form and manner that he or she understands, including in a language the resident and his or her representative understands;

(ii) The resident or his or her representative acknowledges that he or she understands the agreement;

(iii) The agreement provides for the selection of a neutral arbitrator agreed upon by both parties; and

(iv) The agreement provides for the selection of a venue that is convenient to both parties.

(3) The agreement must explicitly grant the resident or his or her representative the right to rescind the agreement within 30 calendar days of signing it.

(4) The agreement must explicitly state that neither the resident nor his or her representative is required to sign an agreement for binding arbitration as a condition of admission to, or as a requirement to continue to receive care at, the facility.

(5) The agreement may not contain any language that prohibits or discourages the resident or anyone else from communicating with federal, state, or local officials, including but not limited to, federal and state surveyors, other federal or state health department employees, and representatives of the Office of the State Long-Term Care Ombudsman, in accordance with § 483.10(k).

(6) When the facility and a resident resolve a dispute through arbitration, a copy of the signed agreement for binding arbitration and the arbitrator's final decision must be retained by the facility for 5 years after the resolution of that dispute on and be available for inspection upon request by CMS or its designee.

Further Reading

The Final Rule and Related Commentary

Our New Nursing Home Arbitration Mandate: Educate, Educate, Educate, Charlie Sabatino, 

American Bar Association, July 24, 2019

Be Wary when Signing Nursing Home Admission Paperwork, Jeffrey Marshall, Marshall, Parker and Weber, July 16, 2017

CMS Regs on Pre-Dispute Arbitration Clauses in SNF Contracts, Rebecca C. Morgan, Elder Law Prof Blog, July 29, 2019

"Elder Law in Pennsylvania" 5th Edition is Published

The Pennsylvania Bar Institute has announced the July 2019 publication of the 5^th Edition of Elder Law in Pennsylvania. The book is widely recognized as the most comprehensive treatise on elder law in Pennsylvania. 

Elder Law focuses on the laws, regulations and legal planning that are of critical importance to the elderly and people with special needs. It encompasses a number of legal concerns that face not only older adults but younger ones as well. These subjects contain issues such as estate planning, estate administration and probate, wills, trusts, taxes, long-term care planning, protecting assets from creditors and care costs, guardianship, powers of attorney, health care decisions, and veteran’s benefits.   

Elder Law in Pennsylvania 5th Edition provides lawyers with the updated information, resources, and tools needed to effectively represent their older clients and those with special needs, as well as younger clients facing similar issues. The new edition contains updates on:

• VA Aid & Attendance benefit rules
• Medicare Advantage plan changes
• Estate Recovery claims
• Powers of Attorney
• Medicaid planning techniques
• Community Health Choices
• new orphans’ court rules and forms
• Medical Assistance applications
• using annuities and notes
• Social Security regulations

The 1^st edition of Elder Law in Pennsylvania was written by Marshall, Parker and Weber founder, Jeff Marshall. It was published in 2005. In 2006, the book received the Award for Outstanding Achievement in Publications from The Association for Continuing Legal Education. Later editions have been updated by elder law experts from across Pennsylvania under the editorial guidance of Jeff Marshall (editions 2 and 3) and Marshall, Parker and Weber principal  Matthew Parker (editions 4 and 5).

The Pennsylvania Bar Institute is the educational arm of the Pennsylvania Bar Association, the statewide lawyer’s organization with approximately 27,000 members. Marshall, Parker & Weber concentrates on elder law, estate planning and administration and special needs planning. Established in 1980, the law firm has offices in Williamsport, Jersey Shore, Wilkes-Barre and Scranton.  More information about the firm can be found at www.paelderlaw.com or by contacting them at 1-800-401-4552.

Elder Law in Pennsylvania 5^th Edition is available in hard copy and digital forms. For more information about purchasing the book, contact

Pennsylvania Bar Institute
5080 Ritter Road, Mechanicsburg, PA 17055
Phone: 800-932-4637 | Fax: 717-796-2348 | Email: info@pbi.org | www.pbi.org

PA Eliminates Inheritance tax on transfers from a Parent to Younger Children

Pennsylvania has now eliminated state inheritance tax on transfers from a parent to or for the use of a child age 21 or younger upon the death of the parent. This includes transfers from a natural parent, adoptive parent or stepparent.

Pennsylvania inheritance tax is imposed as a percentage of the value of most property transferred from a decedent at rates between 0% to 15%. The specific rate of tax depends on the relationship of the heir to the decedent. The inheritance tax rate on transfers from a parent to a child and other descendants is generally 4.5%.

The new law reduces the rate of tax on parent to child transfers to 0% if the child is age 21 or younger. This new 0% tax rate is established in Section 21 of Act 13 of 2019. Here is a link to Act 13 (House Bill 262).  The specific language of the new section reads as follows:

(1.4)  Inheritance tax upon the transfer of property to or for the use of a child twenty-one years of age or younger from a     natural parent, an adoptive parent or a stepparent of the child    shall be at the rate of zero per cent.

This change in the law mirrors a change that was enacted several years ago which set a tax rate of 0% on property transferred from a child aged 21 or younger to a natural parent, adoptive parent or step-parent. Transfers to a surviving spouse are also taxed at 0%.
Transfers to siblings bear a 12% tax rate; transfers to other heirs are taxed at 15% - except charitable organizations, exempt institutions and government entities which are exempt from tax.

The new 0% rate created by Act 13 applies to property transferred by a natural parent, an adoptive parent, or a stepparent who dies after December 31, 2019. (See Section 32 of the Act).  

The legislation was introduced by Representative Carl Walker Metzgar who has stated that it is a step toward his goal of totally eliminating the Pennsylvania inheritance tax. According to the Center on Budget and Policy Priorities only 17 states and the District of Columbia tax inherited wealth.

Why you may get sued for care provided to your Parent or Adult Child

Here is a quick multiple-choice test for you. Who is ultimately responsible to pay for the care needed by an adult who has no way to pay for the care they need?

 A) The Government (e.g. Medicaid, Medicare, Social Security Disability)

B) The company providing the care

C) The spouse, parents and/or children of the care-recipient

D Charities, or

E) No one.  

The correct answer may worry you. Under Pennsylvania law, the correct answer is C – the spouse, parents and/or children of the care-recipient.  For example, if your mother suffers from dementia and has no way to pay for all the care she needs, you may be legally responsible to help pay for her care. Similarly, if your adult child needs care but cannot pay for it, you, as the parent, may be legally responsible to pay. If you do not pay the nursing home or other care provider can sue you for the money.

That is the law in Pennsylvania which has one of the nation’s toughest so-called “filial support” statutes. See the end of this article for the statute language (23 Pa.C.S. §4603.) I’ve written about it before here and here.

Pennsylvania’s statute expresses the policy that institutions supplying care can continue to fulfill that vital societal function without incurring unremunerated costs. The view is that it is more important to protect the care provider than the spouse, parents and children of the care recipient.

However, what if you don’t even live in Pennsylvania? What if you live in a state with much more lenient laws? Can you still be held financially responsible for the unpaid cost of care provided to your parent or child in Pennsylvania? That question was answered recently by the Pennsylvania Supreme Court in the case of Melmark v Schutt. 

In the Melmark case, Alex Schutt was a severely disabled adult who was receiving care at Melmark’s facility in Delaware County. Alex’s parents resided in Princeton, New Jersey. Over the years Alex had qualified for various government benefits which paid for his care. But in 2012 the Government benefits stopped due to a dispute over Melmark’s rates.  Melmark was unpaid for 13 months. The facility sued Alex’s parents for $205,000, the cost of the care it provided before Alex was ultimately transferred to another facility. The parents argued that New Jersey law should apply to them because that is where they lived. New Jersey’s filial support law would not have held the parents financially responsible to pay for the care of an adult child like Alex.

Ultimately, the PA Supreme Court held that Pennsylvania had a stronger interest in this case than New Jersey and that Pennsylvania filial support law applied. The Court reasoned that Pennsylvania law had priority because “Pennsylvania plainly has a strong interest in ensuring that relatives do not leave their disabled family members at private Pennsylvania facilities in such a way that those facilities are forced to incur substantial uncompensated expenses on an indefinite basis – an interest which is reflected in 23 Pa.C.S. §4603.” (See page 19 of the Majority opinion in in the Melmark v Schutt case linked below).

In addition, the Court held that the parents could also be held liable under the doctrines of unjust enrichment and quantum meruit.

The bottom line is that Pennsylvania care providers can and do go after a care-recipient’s parents and children for unpaid bills.  Families need to plan in advance to make certain that their parents and children will always be able to pay for the care they need. You want to create a plan that ensures that they will have sufficient resources, or insurance, or will be able to qualify for government benefits like Medicaid, to pay for any needed care. In Pennsylvania this is a family responsibility.

If you have a spouse, parent or child who may need care, consult with an experienced elder law attorney to learn how to minimize the risk of family financial devastation.

///

Pennsylvania’s filial support law states in part:

23 Pa.C.S.A. § 4603.  Relatives’ liability; procedure.

(a)  Liability.–

(1)  Except as set forth in paragraph (2), all of the following individuals have the responsibility to care for and maintain or financially assist an indigent person, regardless of whether the indigent person is a public charge:

(i)  The spouse of the indigent person.

(ii)  A child of the indigent person.

(iii)  A parent of the indigent person.

(2)  Paragraph (1) does not apply in any of the following cases:

(i)  If an individual does not have sufficient financial ability to support the indigent person.

(ii)  A child shall not be liable for the support of a parent who abandoned the child and persisted in the abandonment for a period of ten years during the child’s minority.

FacebookTwitterLinkedInPinterestTumblrEmailShare

Student Loan Debt Implications for Older Adults

Many older adults are subject to student loan debt. Some con-sign or guarantee the debt of a student family member without understanding the implications.

The following article was written by Margaret Stockdale, an attorney with my law firm Marshall, Parker and Weber.

Unfortunately, as the cost of higher education rises, the number of individuals with student load debt is increasing exponentially. As these debts increase, many individuals are forced to factor them in to their estate plan. According to the Consumer Finance Protection Bureau, between 2012 and 2017, the number of individuals, over the age of 60, borrowing money for education increased by at least 20 percent. While some of these borrowers were doing so for their own benefit, almost 73% of them were taking out student loans for the education of a child or grandchild.

The first step in incorporating these student loan debts in to your estate plan is to determine what type of loans you have. Student loans are characterized as either federal or private. What happens to your student loans at your death depends on the type of loan. It is important to determine the character of your student loans so that you can reduce the chance of your estate being on the hook for the remaining balance at the time of your death.

For example, if you die with federal student loan debt it will be discharged. Therefore, federal student loan debt will not pass on to anyone else. The federal student loans in your name at the time of your death will be discharged after presenting a certified death certificate to the company.

In addition to the generic federal student loans, there is something known as Parent PLUS Loans. Parent PLUS Loans are signed and taken on by the parents of a student. Therefore, when either the parent or student dies, the loan will be discharged in the same nature as discussed above. However, if the student should pre-decease the parent, he or she may experience a negative consequence of the debt discharge. Following the death of the student, the parent will receive a 1099-C form from the IRS notifying them of the discharge, and that amount will be treated as taxable income.

Private loans, on the other hand, are not as easy to incorporate in to your basic estate plan. Certain loan companies will offer discharge of student loan debt upon the death of the borrower, but others will not. More often than not, private student loan debt will be treated as any other type of debt, and the lender can make a claim against your estate at the time of your death. A caveat to this situation is that if the loan is in the name of the decedent alone, then the family will generally not be considered liable for the amount.

In many situations, a parent or grandparent will become a cosigner on a student’s loans. Unlike a family member who is not involved, a cosigner will be liable to continue paying the student loan debt after the student is deceased, regardless of whether or not the loan is federal or private. Not only will a cosigner be liable for the debt, but upon the death of a cosigner the company can place the loan in default and the entire balance may be due immediately.

           Due to the potential outcomes of signing on as a cosigner, you should carefully consider this decision before moving forward. Defaulting on a student loan can lead to many negative consequences for each individual who cosigned. Defaulting cannot only mean having to work longer or delaying retirement plans, but it can even affect your Social Security benefits. If you default on a federal loan, the government is able to take up to 15% of your social security check, each month, as long as that does not bring the amount below $750. This will occur until the debt is paid off, as there is no statute of limitations on student loan debt.

          While it may seem intimidating, it is important to remember that having student loan debt does not make planning for your future impossible. Rather, it may function as motivation to sort out your estate plan a head of time to make retirement age, and your eventual passing, easier to navigate. For more information on how to deal with your particular student loans and the potential complications, please visit the Consumer Financial Protection Bureau at https://www.consumerfinance.gov/about-us/blog/four-tips-help-older-student-loan-borrowers-navigate-common-problems-their-student-loans/.