Schaeffer Center Researchers Make an Impact in Washington

Darius Lakdawalla waited more than three hours before he got his chance to speak at a recent Senate hearing. When he finally got his opportunity, he made it count.

He made Sen. Bernie Sanders laugh.

Near the end of a marathon hearing on drug prices, Sanders asked Lakdawalla – the research director at the USC Schaeffer Center for Health Policy & Economics – what he thought about free-market capitalism, government protection and monopolies.

“Truly free markets exist only on the whiteboard in my classroom at USC,” Lakdawalla quipped. “But it is also true that without patent protection there would be no innovation. That is a result that has been known in economics for centuries.”

Getting a chuckle out of Sanders, the famous former presidential candidate, was a rewarding moment for Lakdawalla, who also fielded questions from Sen. Bill Cassidy during the Senate Committee on Health, Education, Labor and Pensions hearing.

“Ideologically, Sen. Sanders and Sen. Cassidy couldn’t be more different, but their questions demonstrated their depth of knowledge,” Lakdawalla said. “Those two are well-versed in the details of healthcare market institutions. They have very different views about how to weigh the facts and design the right policy solutions, but it was exciting to answer their questions.”

Such exchanges with lawmakers are becoming more common for Schaeffer Center researchers, who have become something of a regular presence in Washington, D.C., where they are informing federal agencies and members of Congress on important topics ranging from biomedical innovation to drug distribution chains.

Schaeffer Center experts have appeared in five congressional hearings since Feb. 2023. The center’s research was cited 33 times in government documents last year alone. Presidents of both parties, meanwhile, have included Schaeffer Center insights in their economic reports since 2013.

“The center’s impact in Washington didn’t happen overnight,” said Schaeffer Center Co-Director and USC Price School Dean Dana Goldman. “It’s largely the result of more than 15 years’ worth of health policy research that is now bearing fruit, as policymakers turn their attention to pharmacy benefit managers, drug price negotiations and other areas where Schaeffer offers expertise.”

Lakdawalla added: “We were researching this before they became hot political issues. We weren’t chasing the latest trend. We had already done the work and been looking at the evolution of those issues in the intervening decade and a half, so we were well positioned to contribute.”

As policymakers took note of these issues, Schaeffer Center researchers contributed with regulatory and policy comment letters on topics ranging from the value of obesity treatment to improving access to gene therapy and timely white papers to inform policy. The center’s presence in Washington is poised to grow further with the opening of USC’s Capital Campus and the launch of the Leonard D. Schaeffer Institute for Public Policy & Government Service.  The Schaeffer Institute, which will open on July 1, will be composed of the Schaeffer Center and the Leonard D. Schaeffer Fellows in Government Service Program, plus additional policy initiatives yet to be named.

Shining a light on PBMs

Schaeffer Center research into the opaque drug distribution chain has garnered a lot of attention, in particular. Researchers have revealed that middlemen such as Pharmacy Benefit Managers (PBMs) play a large role in driving up drug costs. That was the focus of testimony last year from Schaeffer Center Co-Director Erin Trish, who was a witness before the U.S. Senate Committee on Commerce, Science and Transportation.

Evidence suggests PBMs – which manage drug benefits on behalf of health insurers and employers – are leveraging their position to extract profits in a way that is detrimental to patients, Trish told lawmakers at the time. She noted prescription drug markets are a mystery to most Americans. “Where there is mystery, there is margin,” she said.

“The dynamics and the incentives in this market are not working for many patients,” Trish said at the hearing. “That has been overlooked by many policymakers for the last decade or so as we’ve talked about drug pricing reforms and issues. But that has shifted recently.”

Indeed, lawmakers have continued to hold hearings and introduced several proposed laws that would address PBMs. Based in part on the strong data that the Schaeffer Center was able to produce, the issue has garnered strong bipartisan support.

Schaeffer Center research played a pivotal role in a debate about gag clauses, which were contained in agreements between PBMs and pharmacies. Gag clauses prohibited pharmacists from telling customers when they could save money by paying cash instead of their insurance copayment.

Research from Karen Van Nuys, senior fellow and executive director of the center’s Value of Life Sciences Innovation program, found that copayments paid by patients exceeded the cost of the drug to the insurer in almost one in every four claims analyzed. Among these overpayments, the average overpayment was $7.69. However, almost 20 percent of the overpayments analyzed exceeded $10.

Following publication of the study, former President Donald Trump signed two bills that banned the use of gag clauses by pharmacy benefit managers and pharmacies. The legislation, which was introduced by Senators Susan Collins and Debbie Stabenow, was applauded by lawmakers of both parties.

Van Nuys has continued to shine a light on PBMs. Last year, she testified before the Senate Finance Committee and told lawmakers that transparency is “an essential first step.”

“[Transparency] gives researchers like me, and regulators like the federal government the opportunity to understand the bigger picture,” she said at the hearing. “But more importantly, transparency is going to provide participants in the markets with information about the true prices that they are facing and when they have [that] information, they can make better economic decisions.”

She has also engaged with various federal agencies, including departments within the White House. She called last year’s meeting in the White House “one of the most special things that’s happened in my professional career.”

“I’m just really cognizant of how lucky I am that I get to work on research that is relevant to the highest levels of our government,” she said.

Making an impact

The most recent Schaeffer Center expert to make the trip to Washington was Senior Fellow Alice Chen, who spoke at a House subcommittee hearing in February about rare disease treatment. Chen told lawmakers that innovators need economic incentives to develop rare disease treatments and cures. She also warned that using blunt price controls to improve patient access to medications today could harm the development of novel treatments in the future.

“Schaeffer Center research has shown that if we adopt European price controls in the United States, the outcome is lower life expectancy,” she said at the hearing.

Such clear and concise explanations are by design. The Schaeffer Center has emphasized translating its research into something that’s understandable – and actionable – for policymakers, Chen said.

“The Schaeffer Center has a foundation of rigorous, academic research that is peer reviewed and published in top journals. But it doesn’t stop there. Through op-eds, white papers and other tools, research findings are translated into formats that enhance their relevance and viability for policymakers,” Chen said, “It’s really fulfilling to know that the research that we do can actually make a difference by shaping policy discourse.”

Neeraj Sood, director of the COVID Initiative at the Schaeffer Center, was invited to help develop a White House initiative to eliminate Hepatitis C, a disease that kills roughly 15,000 Americans per year even though there’s a cure for it.

The result: a novel subscription payment model that could make Hep C drugs more affordable  – dubbed the “Netflix” model and pioneered by Goldman – was included in President Joe Biden’s proposed budget to tackle Hepatitis C.

“It’s pretty cool that some of the ideas we started working on several years ago and persisted with are finally seeing a lot of interest among policymakers,” Sood said. “If I have a small part to play in eliminating the disease, that’s a pretty big deal, so that would be gratifying.”

Sign up for Schaeffer Center news