Recently,
House Speaker Nancy Pelosi released her caucus’s long-awaited proposal to lower
the cost of prescription drugs. The bill, entitled “Lower Drug Costs Now Act of
2019” or HR 3, includes a number of provisions aimed at reducing drug
prices. These provisions include allowing for direct price negotiations,
reforming rebates under Medicare Parts B and D, and redesigning Medicare Part D
to, in part, limit out-of-pocket costs for Medicare beneficiaries.
The
most far-reaching section of the House Democrats’ bill allows the Secretary of
the Department of Health and Human Services (HHS) to directly negotiate drug
prices for Medicare and the private health insurance market. While the bill was
in development, there was notable infighting among
more moderate Democrats and their progressive counterparts due to concerns that
the Speaker wasn’t going far enough to hold big pharma accountable. In
addition, Republicans have generally opposed governmental price controls, with
Senate Majority Leader Mitch McConnell already stating that the upper chamber
would not “be calling up a bill like that.”
Despite
this initial opposition, House Speaker Pelosi appears poised to move forward
with plans to potentially try to get a vote on the House floor by the end
of October.
Here
are some of the highlights of the House bill:
- Empowers HHS
Secretary to directly negotiate the prices of 25-250 drugs annually
- The maximum
fair price would be the upper limit of 120 percent of the Average
International Market (AIM) price
- So, what does
that really mean? The AIM price is essentially the average price
of a drug in Australia, Canada, France, Germany, Japan and the United
Kingdom
- HHS Secretary
would take research and development costs and the availability of alternative
treatments into account when negotiating
- Imposes an
excise tax on drug manufacturers’ annual gross sales if they fail to
comply with negotiation requirement
- Tax would start
at 65 percent and increase by 10 percent by quarter up to a maximum of 95
percent for every quarter the manufacturer fails to comply
- Levies a new
inflation rebate on drugs in Medicare Parts B and D that would require
drug manufacturers’ price increases to be tied to inflation
- So, what does
that really mean? If a drug company has increased the price of a
drug beyond the rate of inflation, they must either lower it or pay a
rebate to the Treasury
- This provision
has a retroactive clause dating back to 2016
- Establishes a new annual
out-of-pocket spending cap of $2,000 for Part D beneficiaries starting
with plan year 2022
The President himself has
not formally endorsed the Speaker’s bill but he did tweet “it’s great to see Speaker Pelosi’s
bill today” after lending support to Senate Finance Committee Chair
Chuck Grassley’s bipartisan bill.
However, Senator Grassley’s bill is also facing opposition from within his
own caucus. While it’s par for the course to see a division between
Republicans and Democrats on an issue as big as drug-pricing, it is interesting
that there is strong disagreement within each party. Nonetheless, I am hopeful
that some type of bipartisan drug-pricing deal reaches the President’s desk
since we are about to enter an election year.
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