Policy

House drug price negotiation plan could apply beyond Medicare

Draft plan would have government set prices based on those in other wealthy countries

Speaker Nancy Pelosi, D-Calif., has been heavily involved in House Democrats' drug price plan. A spokesman emphasized that it's still a work in progress. (Tom Williams/CQ Roll Call)

A comprehensive drug price bill being developed by House Democrats would give private insurers the benefit of government-negotiated prices, according to a summary of the measure obtained by CQ Roll Call.

Under the Democrats’ draft plan, the government would set prices based on what is paid in other wealthy countries, according to the summary. That is similar to how a proposal by the Trump administration would work.

[Senate bill’s drug pricing provision raises industry alarms]

A negotiation plan would fulfill a major campaign promise, and it comes ahead of a legislating period where drug costs are likely to be one of the few possible areas of bipartisan cooperation. But a senior Democratic aide emphasized that the bill is still being developed by committees and said the summary was based on an outdated draft.

“We continue to engage members across the caucus as the committees of jurisdiction work to develop the boldest, toughest possible bill to lower prescription drug prices for all Americans,” said Henry Connelly, a spokesman for Speaker Nancy Pelosi.

The bill could have broader implications than Democrats had previously suggested, as the negotiated prices wouldn’t only apply to Medicare. Drugmakers also would have to offer them to private health insurers and the Department of Veterans Affairs — and those groups could try to negotiate better prices, too.

[Odd bedfellows share concerns over Pelosi drug plan]

Under the Democrats’ plan, the Health and Human Services secretary would identify at least 250 drugs that lack competition and pose the greatest costs to both Medicare and the broader health care system.

At the start of negotiations, the upper limit on those drugs’ cost would be 1.2 times the average price in Australia, Canada, France, Germany, Japan and the United Kingdom.

Drugmakers that refuse to negotiate would face an excise tax equal to 75 percent of the particular drug’s sales in the previous year.

The prices would apply to drugs reimbursed in Medicare Part B, which covers outpatient doctor visits. It would also apply to Medicare’s drug benefit, Part D, but the private health insurers who administer that program could negotiate lower prices, as could insurers who participate in Medicare Advantage.

The bill would also require drugmakers to pay Medicare a rebate if they raise their prices faster than the rate of inflation. That is an approach similar to a draft bill the Senate Finance Committee approved in July, but the House version would peg the prices to 2016 levels instead of current levels.

Government negotiation and linking drug prices to those paid in other nations may not appeal to Senate Republicans, but the summary indicates that Democrats are interested in other changes that some in the Senate majority want to pursue.

According to the summary, the bill also lifts some portions of both the Senate Finance Committee bill and the bipartisan Part D draft from the House Energy and Commerce Committee and the Ways and Means Committee in redesigning Part D’s financial structure.

The bill would cap patients’ out-of-pocket costs once they reach a “catastrophic” threshold and reduce Medicare’s financial obligations when spending reaches that level.  

The summary indicates that the catastrophic threshold, which is currently $5,100, would be changed, although the new dollar amount is unspecified. The bill would streamline how much the government, insurers, drugmakers and patients pay as drug spending increases, setting patient cost-sharing at 25 percent until the individual reaches catastrophic spending.

Brand-name manufacturers would be required to discount their drugs, but the amount of that discount wasn’t specified in the summary.

The draft indicates that the potential “billions” in savings could be reinvested in research for new treatments or used to pay for hearing, dental and vision coverage for seniors — an item on the Ways and Means Committee’s wish list.

It’s unclear whether the legislation will affect the bipartisan efforts to overhaul Part D from Energy and Commerce and Ways and Means leaders, although a Democratic aide previously told CQ Roll Call the two plans would be separate.

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