November 4, 2021

'A massive step forward’ or ‘nowhere near far enough'? Inside Democrats' new prescription drug pricing plan.

Daily Briefing

    Democrats on Tuesday announced a new prescription drug pricing plan as part of President Joe Biden's $1.75 trillion "Build Back Better" policy proposal—a historic measure that includes the nation's first Medicare drug price negotiation plan. However, opposition from key lawmakers may stymie the bill's passage.

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    Details of Democrats' drug pricing deal

    Senate Majority Leader Chuck Schumer on Tuesday announced a new prescription drug pricing plan, which would allow Medicare to negotiate certain drug prices directly with pharmaceutical companies, limit how much drug manufacturers can raise their prices, and cap out-of-pocket costs for seniors on Medicare, The Hill reports.

    "Fixing prescription drug pricing has consistently been a top issue for Americans year after year, including the vast majority of both Democrats and Republicans who want to see a change because they simply cannot afford their medications," Schumer said. "Today, we've taken a massive step forward in helping alleviate that problem."

    According to the deal's draft framework, Medicare would be able to negotiate the cost of 10 of the most expensive single-sourced drugs by 2025, and up to 20 drugs by 2028, with a carve-out for small biotech companies. However, only drugs that have completed their initial exclusivity periods—nine years for small-molecule drugs and 12 years for complex biologics—would be eligible for negotiation.

    In addition, the government would be able to subject drug companies to an excise tax if they do not comply with Medicare negotiations, although the exact amount of the tax is still unknown, Axios reports.

    The deal also would prevent drug companies from raising the prices of their drugs faster than the 2021 rate of inflation, Politico reports. This inflation cap would apply to drug prices for people on Medicare as well those with private insurance, and penalties for manufacturer noncompliance would be retroactive to Oct. 1. This inflation cap is higher than some Democrats had hoped, as inflation has risen steeply in recent years.

    Notably, the deal intends to limit out-of-pocket costs for seniors on Medicare, as well as reduce the price of insulin. Going forward, seniors would have a $2,000 cap on their out-of-pocket medication costs, down from the current threshold of $6,500, NPR reports. Insulin prices would also be limited to $35 a month, down from a high of $600, AP/Modern Healthcare reports.

    Advocates, industry officials respond

    Public Citizen, an advocacy group that has pushed for a more aggressive drug price negotiation plan, called the new agreement "flawed, but not devastatingly so," noting that more eligible drugs could be added in the future. Steve Knievel, who leads Public Citizen's work on drug reforms, said the current plan is "a pale shadow" of what the organization wanted, but will "still help millions of people."

    Separately, AARP, which advocates for seniors and has called for new drug pricing policies, commended the new deal. "Allowing to finally negotiate drug prices is a big win for seniors," said AARP CEO Jo Ann Jenkins. "Preventing prices from rising faster than inflation and adding a hard out-of-pocket cap to Part D will provide real relief for seniors with the highest drug costs."

    However, the Pharmaceutical Research and Manufacturers of America (PhRMA) largely criticized the bill, calling it "disastrous."

    "While we're pleased to see changes to Medicare that cap what seniors pay out of pocket for prescription drugs, the proposal lets insurers and middlemen like pharmacy benefit managers off the hook when it comes to lowering costs for patients at the pharmacy counter," said PhRMA CEO Stephen Ubl. "It threatens innovation and makes a broken health care system even worse."

    He added, "Under the guise of 'negotiation,' [the drug pricing plan] gives the government the power to dictate how much a medicine is worth and leaves many patients facing a future with less access to medicines and fewer new treatments."

    Democrats face tight battle to pass the bill

    According to AP/Modern Healthcare, House Speaker Nancy Pelosi indicated that she expected a final legislative draft of the drug pricing plan soon and planned to open voting on Biden's overall public policy package as early as Thursday.

    The bill, which is being fast-tracked through Congress via budget reconciliation, requires a simple majority vote to pass, the New York Times reports. Because Republicans have unanimously opposed the bill, all 50 Senate Democrats and all but a few House Democrats are needed to pass the bill.

    However, intra-party misalignment among certain moderate, conservative, and progressive Democratic members may stymie the bill's passage. In particular, Sen. Joe Manchin (D-W.V.) has not indicated whether he would support the plan, and Sen. Bernie Sanders (I-VT) said the plan goes "nowhere near far enough." Five Democrats have also written a letter to Pelosi saying they would withhold their votes on the bill until nonpartisan scorekeepers had the chance to assess the total cost of the legislation, the Times reports.

    Despite these potential obstacles, Juliette Cubanski, a deputy director at the Kaiser Family Foundation, highlighted the importance of the bill, saying that if it becomes law, it "would be a pretty significant accomplishment, particularly in light of the pushback that [lawmakers] are getting from industry stakeholders, who have a lot of money invested in not seeing these policies take effect." (Owens/Treene, Axios, 11/3; Treene/Owens, Axios, 11/2 [1]; Herman, Axios, 11/2; Ollstein, Politico, 11/2; Owens, Axios, 11/3; Treene/Owens, Axios, 11/2 [2]; AP/Modern Healthcare, 11/2; Wise, NPR, 11/2; Sullivan, The Hill, 11/2; Weisman/Cochrane, New York Times, 11/2)

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