Jonathan
Gardner September 19, 2019
Dive Brief:
- Medicare
would negotiate the prices of at least 25 and up to 250 drugs with no
direct competition and set a maximum price based on what's paid in other
countries under a plan pitched by House Speaker Nancy Pelosi, D-Calif., to
restrain drug spending.
- The
legislation released Thursday faces a hearing next week, where moderate
Democrats and Republicans may seek to tone down the price negotiation
proposal and progressives may seek to widen it.
- If
Pelosi's proposal passes, House leaders will need to haggle with their
Senate counterparts to resolve differences over that body's version of the
bill, which does not contain the direct price negotiation proposal.
Dive Insight:
Drug prices are
a rare area where Republicans and Democrats agree, at least in theory, that
action is needed to drive them down. Pelosi's plan to directly negotiate
Medicare drug reimbursement is the most ambitious, and probably least likely to
become law, of any that has emerged so far.
When the
Medicare Modernization Act that created an outpatient drug benefit passed in
2003, the U.S. government was explicitly barred from direct negotiation of
prices with drug manufacturers. That role was left to the private plans into
which beneficiaries enroll to receive prescriptions.
Left-leaning
policymakers have kept the idea alive since then as a way to restrain drug
price increases, and even President Donald Trump briefly endorsed the idea
between his 2016 election and 2017 inauguration, but he has since backed away
from the idea. Pelosi's proposal is the closest the concept has been to
becoming law, but still remains a long shot.
As it stands,
the Pelosi proposal, as reported by The Hill and others, would allow for
price negotiation of up to 125 pharmacy-dispensed drugs covered by Medicare
Part D and 125 physician-administered drugs under Part B that have no direct
competition.
Unlike a draft
revealed last week, the formal Pelosi proposal recognizes "the practical
capacity and bandwidth constraints" of HHS and calls for annual
negotiation of a "bare minimum" of 25. The top 25 drugs that would be
eligible for negotiation account for 23% of Part D drug spending, and the top
25 in Part B account for 66% of drug spending.
Under the
Pelosi proposal, a maximum price for each drug would be set at 1.2 times an
average of what is paid in Australia, Canada, France, Germany, Japan and the
United Kingdom. Companies refusing to negotiate would be taxed at 65% of the
drug's gross sales, escalating quarterly to 95%.
A bill that the
Senate Finance Committee voted to send to the full chamber in July didn't
contain direct Medicare price negotiation, as Pelosi's draft does.
Moreover, such a concept would be unlikely to win support in the
Republican-held Senate.
Republican
members of the House Energy and Commerce Committee, a subcommittee of which
will debate the bill next week, were quick to criticize the
legislation. "Now Speaker Pelosi is back at it — pushing a socialist
proposal to appease her most extreme members. It does not have to be this way;
there are bipartisan solutions to bring down prices for patients and create
real transparency and accountability for this system," the Republicans wrote.
PhRMA President
Stephen Ubl was equally critical. "We do not need to blow up the current
system to make medicines more affordable," he said in a statement.
The Pelosi plan
did include some areas of agreement with the Senate plan, including mandated rebates
on drugs with prices increasing faster than inflation and limiting Medicare
beneficiaries' cost-sharing once they have paid out an annual deductible.
With agreement
in both chambers, those provisions would likely be included in a compromise
bill that both houses of Congress would need to approve before sending to the
White House.
Pelosi's
proposal to tie Medicare drug reimbursement to prices paid overseas bears some
similarities to a concept backed by Trump.
The Trump
proposal, part of a proposed regulation published last year, is limited to
physician-administered drugs reimbursed under Medicare Part B, using a
competitive bidding mechanism. By contrast, Pelosi's plan would set a maximum
price of 1.2 times an international price index for any drug subject to direct
Medicare price negotiation.
Rachel Sachs, a
Washington University associate law professor who specializes in biotechnology
issues, said a compromise that does not include drug price negotiation will not
meaningfully affect drug price increases, even if both agree on inflation
rebates.
"The
Senate plan helps seniors with out of pocket costs but wouldn't really make the
fundamental changes to our drug payment system that [Pelosi's] does," she
said.
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