Clinton proposes $250 monthly cap on prescription drug costs

Democratic presidential candidate Hillary Clinton on Tuesday will propose a $250 monthly cap on prescription drugs for patients with chronic or serious medical conditions in a drive against what she calls "excessive profiteering" by pharmaceutical companies.

At a campaign stop in Iowa, Clinton will outline a plan to encourage the development and use of generic drugs and also would end drug companies' ability to write off consumer-directed advertising as a business expense.

Under Clinton's plan the monthly cap would limit what insurance companies could ask patients to pay for drugs.

On Monday, Clinton vowed during a campaign stop in Little Rock, Arkansas that, "It is time to deal with sky-rocketing out-of-pocket costs."

Shares of biotech companies such as Immunogen and Gilead Sciences on Monday dropped after Clinton tweeted that steep prices for specialty drugs were "outrageous."

Critics of marketing drugs to consumers say it encourages the use of costly brand names over generics and can be confusing or misleading. A series of court decisions has determined the practice cannot be banned outright because it is a form of commercial speech protected by the U.S. Constitution.

Clinton says the government could save billions of dollars by no longer allowing pharmaceutical companies to deduct what they spend marketing drugs to consumers and those funds could be redirected into encouraging research and development.

The largest pharmaceutical companies are collectively earning $80 billion to $90 billion per year at higher margins than other industries, while average Americans struggle to pay for medicine, Clinton's campaign said.

While Clinton has maintained her front-runner status, she has been under pressure to take more populist stances to widen her lead over U.S. Senator Bernie Sanders, her second-place rival for the Democratic nomination.

Clinton's plan would encourage the development and use of generic drugs. Her plan would redirect funds to a U.S. Food and Drug Administration office with a backlog of generic drugs awaiting approval.

She would also prohibit what the campaign called "pay-for-delay agreements," in which the company of a brand-name drug pays a generic competitor to keep its product off the market for a period of time, usually as part of a litigation settlement.

Clinton wants Medicare, the U.S. government's health insurance program for the elderly, to be able to negotiate with pharmaceutical companies over drug prices and require more generous rebates, driving down overall costs.

Consumers would also be allowed to purchase drugs from other countries, where medicine is often less expensive, so long as there are sufficient safety standards in place, Clinton's campaign said.

For more on the 2016 presidential race, see the Reuters blog, "Tales from the Trail"