The leader of the Ways and Means Health Subcommittee on Thursday offered a proposal to require the Department of Health and Human Services to negotiate prices for drugs covered by the Medicare prescription drug benefit.
Rep. Lloyd Doggett, D-Texas, is set to formally introduce the bill later Thursday with more than 100 House co-sponsors. A companion bill was introduced in the Senate backed by Sens. Sherrod Brown, D-Ohio; Amy Klobuchar, D-Minn.; and Tammy Baldwin, D-Wis.
House Democrats are expected to debate the legislation to allow Medicare to negotiate drug prices, although Senate Republicans are unlikely to take up such a plan. The measure includes tactics to urge drugmakers to reach an agreement with Medicare on a price.
The Ways and Means Committee is set to hold a hearing on prescription drug prices next week.
“If you only have bidding and you don’t have any power to do anything about those who won’t compete, who won’t negotiate fairly, then you don’t get any place. And so we provide a specific way to encourage negotiation to happen in good faith,” Doggett said.
Under Doggett’s proposal, HHS would negotiate prices for prescription drugs covered by the private plans in Medicare Advantage and the Part D program using a set of factors, some of which are laid out in the bill. To encourage drugmakers to negotiate, HHS would issue a competitive license allowing generic manufacturers to produce the drug at a lower cost and provide compensation to the original manufacturer if the department and the brand-name pharmaceutical company did not reach an agreement.
A generic manufacturer who produced a drug under a competitive license would receive expedited review of the product from the Food and Drug Administration.
While a generic company developed a drug and waited to secure approval, the price of the drug from the original manufacturer would be based on the average price of the drug of countries in the Organization for Economic Cooperation and Development with half the gross domestic product of the U.S. That is somewhat similar to a Trump administration proposal to base prices for drugs covered by Part B on some foreign prices.
Negotiations would need to wrap up at least 30 days before an insurance plan year begins. The idea resembles the way the Department of Veterans Affairs negotiates lower drug prices.
Supporters and Critics
More than 100 members have signed on to the House bill, Doggett said. An array of advocacy groups including Public Citizen, Families USA and the Progressive Change Campaign Committee backed the bill, which mirrors similar bills Doggett has supported in recent years.
Rep. Peter Welch, D-Vt., who was among the lawmakers at a Thursday press conference to introduce the measure, introduced a separate bill earlier this year to require HHS to negotiate prices with private Part D drug plans. That measure secured the support of one Republican, Rep. Francis Rooney of Florida.
“What we’re going to be doing in Ways and Means and Energy and Commerce is starting to get testimony and then building a political consensus for doing something that’s effective,” Welch said. “It might be this idea that I think is terrific that Lloyd is the leader on, or it might be another. Bottom line: we have a common goal.”
Another option some Democrats are considering is to use an independent arbiter to negotiate prices, Doggett said. He said he’s talked with House Democratic leaders about a House floor vote.
Brown, who sits on the Senate Finance Committee, said he hoped a strong House passage vote would pressure President Donald Trump, who voiced support for Medicare to negotiate drug prices as a candidate but has since backed off that idea, to urge Senate Republicans to consider the bill.
House Democrats passed a negotiation bill similar to Welch’s in January 2007 by a vote of 255-170. There were 24 Republican “ayes,” including five current members. But that bill didn’t include the strong-arm tactic of compulsory licensing.
The proposal is likely to face fierce resistance from the pharmaceutical industry. Patient and industry groups already have pushed back on more modest plans pushed by the Trump administration to increase insurers’ leverage in Part D, such as a plan to roll back requirements that insurers have to cover almost all drugs in six protected categories, which include treatments for cancer and HIV/AIDS.
One of the main criticisms of direct government negotiation in Medicare Part D is that the government would decide which treatments not to cover.
That’s currently how the private plans that administer Part D operate, by assembling formularies of covered drugs and making competitors compete to be on those lists.
But if a patient can’t get one drug he or she truly needs, there are usually other Part D plans that might offer more appropriate coverage. Patients wouldn’t have that luxury if the government applied a formulary to the whole program.
“In lots of European countries, where they have lower prices and price negotiation, they do it by withholding coverage if they don’t like the price,” said James Love, director of Knowledge Ecology International, a nonprofit that focuses on intellectual property. “And that’s good for the budget but it’s certainly not good for the patients that need that drug.”
Supporters of the Doggett bill say it challenges the monopoly-pricing business model that the drug industry currently uses in a way that won’t harm access, since other drug companies would be able to come in and manufacture the drug for a better price.
“The ability to say, ‘If we can’t come to a satisfactory agreement on what the price can be, if we think the price is excessive, that we can end the legal monopoly,’ that’s really an essential thing to ensure that while you bring prices down you don’t hurt access,” Love added.
Still, the government might have a harder time being a hard-nosed negotiator, starting with what it might deem to be an acceptable price.
“The government is susceptible to lobbying, is susceptible to direct advocacy, and often has a very difficult time making clinical decisions that are necessary in order to save money,” said Dan Mendelson, founder of the consulting firm Avalere Health and a health care official at the Office of Management and Budget during the Clinton administration.