What you need to know about the forces reshaping our industry.


October 18, 2019

Pelosi's Rx drug pricing bill clears initial hurdles. But will it reach the Senate?

Daily Briefing

    Two House committees on Thursday separately approved House Speaker Nancy Pelosi's (D-Calif.) bill (HR 3) that aims to reduce prescription drug prices in the United States, but they made some key changes.

    Your cheat sheets for understanding health care's legal landscape

    Bill details

    The Lower Drug Costs Now Act includes several provisions intended to lower U.S. drug prices. For instance, the original bill would allow the HHS secretary each year to negotiate prices for between 25 and 250 high-cost drugs that lack generic or biosimilar competition on the market. The bill would establish a drug price ceiling for the negotiations based on the prices paid for the drugs in other countries—which is somewhat similar to a White House proposal that would tie payments for drugs covered by Medicare Part B to certain international prices.

    Pharmaceutical companies that refuse to negotiate prices with the department would face a 65% tax on the drug's annual gross sales from the previous year. That penalty would increase by 10 percentage points for every quarter that a deal remains unstruck, with the penalty maxing out at 95%. If a drugmaker negotiates a price with HHS but then overcharges Medicare or does not provide other payers the negotiated price, HHS could levy a civil penalty equivalent to 10 times the difference between the negotiated price and the offered price.

    The bill also would set limits for prescription drug price increases and would create an out-of-pocket maximum of $2,000 for prescription drugs purchased through Medicare Part D.

    Committees alter, advance Rx drug pricing bill

    In separate hearings Thursday, the House Energy and Commerce Committee and the Education and Labor committees both advanced the bill after adopting a wide-ranging substitute amendment that altered the original bill.

    For instance, the substitute amendment increased the minimum number of drugs that the administration would have to negotiate over time from 25 to 35 and raised the threshold for drugs that could be subject to HHS negotiations from those with one generic competitor to those with two generic competitors. The amendment also added new price transparency requirements for drugmakers and expanded eligibility for the low-income subsidies offered in Part D.

    The committees also adopted some one-off amendments. For instance, the House Energy and Commerce adopted a bipartisan amendment that would increase Medicare Part B reimbursements for generic versions of biologic drugs, known as biosimilars, for five years. Under current rules, Medicare Part B reimburses providers a 6% markup of the drug's average sales price. The adopted amendment would increase that rate to an 8% markup of the drug's average sales price.

    Meanwhile, the Education and Labor Committee adopted four amendments offered by Democrats.

    The amendments would require that the copayment for a drug under participating employer plans not exceed the negotiated price, require federal investigators to examine the effects of price negotiation and extending the inflation cap to employer plans, and ensure data collected under the bill is not duplicative.

    Republicans voice opposition during committee debates

    Both committee's advanced the bill along party line votes, with Democrats voting in favor and Republicans voting against.

    During the debates, Republicans cited recent Congressional Budget Office findings that the drug industry would likely produce fewer drugs over the 10-year period than it would under current law. Republicans during the debate argued that those potential losses could jeopardize investments into treatments for Alzheimer's disease and other conditions.

    Next steps

    The House Ways and Means Committee is expected to mark up and vote on the measure next week, setting the bill up for a full House vote during the last week of October, Bloomberg reports.

    However, the bill's prospects in the Senate, where Senate Finance Committee Chair Chuck Grassley (R-Iowa) is working to rally support for a Senate drug pricing bill, are unclear. House Republicans during the committee markups noted that the bill is unlikely to advance outside of the House because Senate Majority Leader Mitch McConnell (R-Ky.) has said he does not plan to bring the bill to the Senate floor (Siddons et al., CQ News, 10/17 [subscription required]; Lovelace, CNBC, 10/17; Ruoff et al., Bloomberg, 10/17; Siddons et al., Roll Call, 10/17; King, FierceHealthcare, 10/17).

    Have a Question?


    Ask our experts a question on any topic in health care by visiting our member portal, AskAdvisory.