At the Margins

Curious about the impact of the Lower Drug Costs Now Act? Keep reading.

by Robin Brand and Sophia Duke-Mosier

Amid all the buzz on the Hill about impeachment, you may have forgotten about House Speaker Nancy Pelosi's (D-Calif.) Lower Drug Costs Now Act proposal, but it's definitely worth your attention. If passed, this legislation will have a significant impact on provider finance.

Infographic: Five ways to control the flow of drug expenditures

Bill details

The Lower Drug Costs Now Act, released on September 19, would allow HHS Secretary Alex Azar to negotiate prices annually for up to 250 high-cost drugs that do not have generics or biosimilar equivalents. Drugs would be selected for negotiation based on price and volume and could exclude high-priced but low-volume drugs. These negotiated prices would be available to all consumers, and pharmaceutical companies could face penalties if prices are not followed.

The American Hospital Association (AHA) supports the legislation due to rising costs. The AHA reported an 18.5% increase in total drug spending per hospital admission from 2015 to 2017. For providers, the bill would mean:

  • Lower drug spend;
  • Potential savings for patients due to lower costs; and
  • Updates to the chargemaster.

Why this bill—and similar legislation—merits your attention

For revenue cycle specifically, updating the chargemaster after new charges are set will be critical. Billing errors due to an outdated chargemaster could cost millions of dollars in underpayments and denials (remember Beesly Health?), so it's important that revenue cycle and revenue integrity departments track legislation and act quickly if passed.

Regardless of the bill's rejection or approval, action on drug pricing from either the House or the Senate can be reasonably expected given how hot this topic has been (think: The Prescription Drug Pricing Reduction Act introduced in July and additional bills). This bill and others are an important reminder of the cost volatility of drugs. Patients need price transparency and it's on revenue cycle departments and organizations to explain patient liability when it comes to drugs. Putting effort into this now will mean less anticipation as bills make their way through Congress. 

Five ways to control the flow of drug expenditures

Prescription drug expenditures are the fastest growing component of health care spending. And while reducing unwarranted prescribing variation is the single biggest improvement opportunity, there are several other near-term chances to reduce spending and grow revenues.

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