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Congress Considers Prescription Drug Price Controls for Seniors

December 5, 2019

A sweeping drug pricing bill pushed by House Speaker Nancy Pelosi (D-CA) has been slowed by a disagreement between progressive and more moderate Democrats.

Progressives in the Democrat-controlled House aim to expand the bill’s reach through amendments, whereas moderates fear a sharper turn to the left would do little for their constituents and doom any chances for a compromise with the Republican-controlled Senate.

The centerpiece of the Pelosi bill is a provision that would allow the Department of Health and Human Services (DHS) to negotiate drug prices directly with pharmaceutical companies for up to 250 drugs per year that don’t have generic or biosimilar competition.

As currently written, the bill would also place a tax penalty on pharmaceutical companies that refuse to negotiate or fail to reach an agreement on price reductions with DHS, starting at 65 percent of the gross sales of the drug in question and rising as high as 95 percent.

Costs of Price Control

The nonpartisan Congressional Budget Office (CBO) gave the bill mixed reviews, concluding the measure would save Medicare $345 billion over the coming decade but would cause eight to 15 drugs not to come on to the market over 10 years.

The bill’s effect on drug innovation could be much worse than the CBO predicts, says Chris Holt, director of health care policy at the American Action Forum.

“[An innovation decline can happen], particularly as the loss of revenue for drug makers that CBO assumes in the preliminary score is equivalent to the cost of developing between 172 and 345 new drugs,” said Holt.

The $345 billion in predicted Medicare savings is also questionable, says Grace-Marie Turner, president of the Galen Institute.

“[The] new tax would flow to federal coffers and not to reduce drug prices for seniors,” Turner wrote in the organization’s newsletter.

Amended in Committee

Arguing the Pelosi bill didn’t go far enough to bring down drug costs, House progressives led by Rep. Pramila Jayapal (D-WA) amended the legislation to require a feasibility report on requiring drug makers to refund money not just to Medicare but also to private insurers if drug prices rise faster than the overall inflation rate.

The Education and Labor Committee adopted the Jayapal amendment, which specifies the provision may not be stripped from the final bill, The Hill reported on October 30.

“The further left you go with drug pricing bills, it just means it’s only going to be a House-only bill or a Democrat-only bill,” said Anthony Brindisi (D-NY), co-chairman of the centrist Blue Dog Coalition. “That’s not helping people in my district.”

No Chance in Senate

Senate Majority Leader Mitch McConnell has vowed to block the Pelosi legislation in his chamber.

A bipartisan bill introduced in July by U.S. Sen. Chuck Grassley (R-IA) and U.S. Sen.  Ron Wyden (D-OR) is still awaiting floor action after passing through the Finance Committee in that month. The Prescription Drug Pricing Reduction Act of 2019 would set an out-of-pocket annual maximum for Medicare Part D beneficiaries at $3,100 starting in 2022. The bill would also penalize pharmaceutical companies if the price of a drug rises faster than the overall inflation rate.

The Grassley-Wyden legislation would also force pharmacy benefit managers (PBMs) to disclose information on the discounts they negotiate. PBMs function as middlemen for health care insurers to negotiate drug prices with manufacturers, health plans, and pharmacies.

The bill would also require drug manufacturers to report to DHS information and supporting documentation to justify price increases for prescription drugs.

Unlike the Pelosi bill, the Senate measure would not allow the DHS to negotiate drug prices directly with pharmaceutical makers.

‘Profit Over Patients’

The CBO estimates the Grassley-Wyden legislation would save U.S. taxpayers $85 billion over ten years and reduce beneficiaries’ out-of-pocket costs by $27 billion.

In an October 29 op-ed in the Washington Times, Grassley and Sen. Mike Braun (R-IN) said “the process of getting a drug from its manufacturer to the patient is too complex, opaque, and expensive. The pharmaceutical supply chain is wrought with special interests that too often prioritize profits over patients.”

Both bills are opposed by Pharmaceutical Research and Manufacturers of America (PhRMA), a drug industry trade group. PhRMA says the bills would restrict patients’ access to medicines and fail to provide meaningful monetary relief for seniors at the pharmacy counter.

Price Controls, Restricted Access

In a March 2019 analysis of price controls and access to new medicines in economically advanced countries between 2011 and 2018, Galen Institute Senior Fellow Doug Badger found for new medicines, “89% are available to Americans, compared with 62% in Germany and 60% in the United Kingdom. One half or more of these therapies are not available to Australian, Canadian, French, and Japanese patients.”

These are the countries that would be used as benchmarks for U.S. price controls, Badger notes in his study.

 

Bonner R. Cohen, Ph.D., (bcohen@nationalcenter.org) is a senior fellow at the National Center for Public Policy Research and a senior policy analyst with the Committee for a Constructive Tomorrow.

 

Internet Info:

Doug Badger, “Examination of International Drug Pricing Policies in Selected Countries Shows Prevalent Government Control over Pricing and Restrictions on Access,” The Galen Institute, March 2019: https://www.heartland.org/publications-resources/publications/examination-of-international-drug-pricing-policies-in-selected-countries

Author
Bonner R. Cohen is a senior fellow with the National Center for Public Policy Research, a position he has held since 2002.
bcohen@nationalcenter.org