October 8, 2019

Buttigieg released his plan to lower Rx drug prices. Here's what's inside.

Daily Briefing

    South Bend, Indiana, Mayor Pete Buttigieg (D), who is seeking the 2020 Democratic nomination for president, on Monday released a plan intended to lower U.S. prescription drug costs.

    Where do the 2020 Democratic hopefuls stand on health care?

    Plan details

    Negotiating drug prices

    The plan, titled "Affordable Medicine for All," calls for allowing federal officials to negotiate the prices of drugs covered by Medicare—a proposal that has long been backed by Democrats. However, Buttigieg's proposal also calls for allowing the federal government to negotiate prices of drugs covered by his so-called "Medicare-for-All-Who-Want-It" plan. The negotiated prices also would be available to private health plans and Medicaid, though such plans would not be required to use the prices.

    Under Buttigieg's plan, HHS would prioritize negotiating prices for the most costly medicines, as well as those that are sold at lower prices in other countries and medications intended to treat arthritis, asthma, cancer, diabetes and, HIV. The proposal would require HHS to negotiate the prices of at least 25 drugs each year. HHS would negotiate prices based on:

    • A drug's benefits;
    • A drug's international prices;
    • The cost of bringing a drug to market; and
    • The cost of treating the condition a drug treats.

    Under the plan, drugmakers that refuse to negotiate with the federal government or that do not reach an agreement with the government would be required to pay a tax on the company's gross sales of the drug targeted by the negotiations. The tax would start at 65% and increase by 10% for each quarter the company does not comply with HHS, capping at 95%. In addition, the proposal states that the federal government would be permitted to revoke a company's patent for a drug and allow other companies to manufacture and sell the drug at an affordable price if the drugmaker refuses to negotiate with HHS or in instances of a natural disaster or other public health emergency.

    Capping out-of-pocket costs

    Buttigieg's proposal also calls for capping out-of-pocket costs for seniors and individuals enrolled in his Medicare-for-All-Who-Want-It plan. Specifically, the plan would cap monthly out-of-pocket costs at $200 for seniors, and at $250 for individuals enrolled in Buttigieg's public option health plan.

    The plan also includes provisions aimed at decreasing median annual out-of-pocket costs for certain Medicare Part D enrollees with immune disorders or cancer and lowering the cost of the opioid-overdose reversal drug naloxone.

    In addition, the plan states that low-income individuals enrolled in government-sponsored health plans would not have out-of-pocket costs for generic and biosimilar drugs.

    Bolstering competition, innovation, and transparency

    Buttigieg's proposal also includes provisions intended to boost the federal government's investments in prescription drug manufacturing and research, with a particular focus on antibiotics and drugs to prevent pandemics, though it does not state how much funding would go toward such initiatives.

    The plan calls for allocating $100 million per year to FDA to help drugmakers develop generic versions of complex treatments, such as inhalers that treat asthma. In addition, the plan states that companies could receive tax breaks for investing in U.S. drug manufacturing and innovative manufacturing approaches, such as 3D printing.

    The plan also states that the federal government would help to fund state-run experiments focused on bringing down drug costs, including programs to import lower-priced drugs from other countries.

    Further, Buttigieg's proposal aims to increase transparency among prescription drugmakers, as well as pharmacy benefit managers (PBMs). For instance, the plan would implement new reporting requirements for PBMs and require drugmakers to report on manufacturing costs and drug prices.

    Buttigieg's plan would prohibit so-called "pay-for-delay" agreements, under which a brand-name drugmaker pays a generic drug company to delay competition in the market. In addition, the plan calls for barring brand-name drug companies from withholding samples that generic drugmakers need to manufacture generic drugs.

    Funding for the plan

    The plan calls for increasing a fee on brand-name prescription drug companies that originally was implemented under the Affordable Care Act to a minimum of $8 billion annually, indexed to inflation. The increase would be about $5 billion more annually than drugmakers currently pay for the fee.

    In addition, the proposal calls for increasing the amount drugmakers must pay once Medicare Part D beneficiaries hit the "catastrophic" phase of their plans.

    The proposal also would penalize drugmakers for rising the prices of brand-name drugs at a rate faster than inflation.

    An aide for Buttigieg's campaign said the proposal would be "cost neutral," with $1 billion to $2 billion of the plan's costs coming from drug company taxes and penalties (Karlin-Smith, Politico, 10/7; Florko/Facher, STAT News, 10/7; Volcovici, Reuters, 10/7; Judd, CNN, 10/7; Buttigieg, Boston Globe, 10/7; "Affordable Medicine for All," Buttigieg's campaign website, accessed 10/7).

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