House Democrats on Thursday released the outline of a long-awaited drug price proposal, taking a step toward fulfilling one of the party’s signature campaign promises: requiring Medicare to negotiate drug prices.
The bill would allow commercial insurers to benefit from the Medicare-negotiated price as well, and base Medicare’s highest-acceptable price on the lower prices other wealthy countries pay.
The plan is the culmination of months of work by Speaker Nancy Pelosi of California and committee leaders who sought to write a bill that can win support across the political spectrum of Democrats, and potentially appeal to a few Republicans who think the government should address rising drug prices.
The big question is whether the bill would appeal to one Republican in particular — President Donald Trump. Bill provisions that would set the price negotiation ceiling at 120 percent of the average paid by six other wealthy countries strongly resemble a proposal on Medicare drug reimbursements put forward by the Trump administration.
Yet the expectations for a Trump and Pelosi alliance on drug prices are low. Even if the two agreed, the president would have to work hard to win support from Senate Republicans. A Senate Finance Committee proposal that shares similarities with Pelosi’s bill — with both seeking to impose penalties for drugmakers that raise their prices faster than the rate of inflation — is struggling to achieve widespread Republican support in the chamber.
One prominent GOP senator on Thursday called Pelosi’s plan a nonstarter.
“The speaker’s plan is just the latest example of a partisan messaging document masquerading as legislation, and it has absolutely no chance — zero, zip, nada — no chance of passing the Senate or becoming law,” said Sen. John Cornyn, R-Texas.
Pelosi rejected the idea of negotiating a bill that doesn’t allow the government to negotiate prices.
“No, absolutely, positively no,” Pelosi said Thursday when asked about that possibility.
Democratic pollster and political strategist Celinda Lake told CQ Roll Call earlier this week that she doesn’t see any upside to Democrats accepting less than their own plan.
“We need a big deal, and I think that we need to be sure that we don’t get bought off with a small deal,” said Lake, noting that voters want to see dramatic change.
But Robert Blendon, professor of health policy and political analysis at the Harvard T.H. Chan school of public health, says it would benefit Democrats to enact a bill that helps people with one aspect of their health costs.
“It would be useful for the Democratic majority in the House to show that they can actually work with the other body and the president to get something done that people care about,” he said.
Drug plan details
The House bill would require the Health and Human Services Department to identify the 250 drugs that pose the greatest cost to the health care system and don’t have any generic competition. Insulin, a life-saving drug for diabetics, would be subject to negotiation.
According to the bill released Thursday, HHS would be ordered to negotiate prices for “as many drugs as possible each year,” but would have to negotiate for a minimum of 25.
The bill notes that 25 drugs make up two-thirds of spending for drugs provided in an outpatient setting and covered under Medicare Part B, and nearly a quarter of spending in Medicare’s drug benefit, Part D.
The negotiated price would not be able to exceed the ceiling set by the international reference price. Once a drug has a generic competitor, its price would no longer be limited by the negotiation program.
HHS would be directed to prioritize drugs based on the greatest potential savings to taxpayers, and consider their research costs and whether the drug provides value relative to alternate treatment options.
The HHS-negotiated price would also apply to Medicare Advantage private plans and the private insurers that administer Medicare’s drug benefit, Part D — but those insurers would still have the ability to lower prices even further. The drugmaker would have to offer the negotiated price to commercial health insurance plans, but they wouldn’t be required to accept it.
Under Pelosi’s proposal, drugmakers that refuse to negotiate would be hit with a tax penalty equal to 65 percent of the company’s annual gross sales. The penalty would increase by 10 percent every quarter a manufacturer is out of compliance but wouldn’t exceed 95 percent.
Drugmakers would also face a penalty if they overcharge Medicare from the negotiated price or don’t offer the price to private insurers. That penalty would be 10 times the difference between the price charged and the negotiated price.
The outline released Thursday closely resembles a draft summary of the bill that leaked last week, but makes a few changes. The tax penalties are harsher, as the previous version would have applied a 75 percent tax to sales of the company’s specific product that was under negotiation. The plan would no longer require drugmakers to offer the HHS price to the Department of Veterans Affairs or the military’s TRICARE system, which both already get some of the lowest prices available.
Pelosi and House committee leaders began briefing lawmakers on the proposal this week, and House panels will start legislative hearings next week. Pelosi is scheduled later on Thursday to brief the Congressional Progressive Caucus, whose members will likely raise questions about several issues the summary doesn’t address.
Some House Democrats worry that the bill would limit the number of drugs that Medicare could negotiate in a year to 250, and that HHS would prioritize drugs based on savings rather than the drug’s overall public health benefit. The summary doesn’t explicitly impose a ceiling, but suggests there is a “practical capacity and bandwidth constraints” that would prevent HHS from negotiating every single drug that’s available.
Progressives have also been concerned the bill wouldn’t account for drugs that launch with high prices, since penalties for noncompliance would be based on prior-year sales. Similarly, they want a solution when a drug has no international price to reference.
House and Senate Finance similarities
The bill contains other provisions with bipartisan support that could be enacted absent the negotiation proposal.
It would impose an out-of-pocket spending maximum of $2,000 for Medicare Part D beneficiaries, and require greater discounts from drugmakers whose products are covered, a policy idea supported by House and Senate Republicans. The draft bill marked up by the Senate Finance Committee in July contains a similar proposal.
Both House and Senate bills would revise how much risk the government, Part D insurers and drugmakers must take when a patient’s drug spending exceeds the out-of-pocket limit.
Currently, the government pays 80 percent once the spending reaches the so-called catastrophic phase, with insurers liable for 15 percent and patients on the hook for 5 percent.
Both plans would shield patients from paying any catastrophic costs, and would also reduce the government’s share to 20 percent over time. While the Finance bill would require drugmakers to provide 20 percent discounts and have insurers responsible for 60 percent of catastrophic costs, the House bill is tougher on drugmakers — imposing a 30 percent discount, with the remaining 50 percent for insurers.
Under the House plan, all drugmakers would also have to provide additional 10 percent discounts during the initial phase of drug coverage, when patients pay 25 percent of the drug’s costs and insurers are responsible for the rest.
The changes to redesign the Part D program would take effect in 2022.
The Congressional Budget Office estimated that the Senate Finance Committee’s version of that plan would save the federal government $34.6 billion over a decade. The House proposal also includes the Finance bill’s punitive rebates on drugmakers that raise the price of their drugs faster than inflation, which has the potential to save taxpayers $68.2 billion over a decade.
The combination of those policies would result in Part D premium spending decreasing by $6 billion over a decade, and beneficiaries’ out-of-pocket costs would decline by $25 billion over a decade, the CBO said.
While the Finance bill would set the price baseline in the present, the House bill is also retroactive. It would punish drugmakers who raised prices above inflation starting in 2016 — potentially requiring drugmakers to revert some products to 2016 prices or pay a rebate to Medicare.
The House plans to put the money saved into health research funding and potentially expand Medicare’s coverage of vision, hearing and dental benefits, the summary said.
Niels Lesniewski and Lindsey McPherson contributed to this report.