House Democrats Long-Awaited Drug Pricing Proposal Calls for Direct Price Negotiation

| Brittany McCullough
Expensive medicine concept - colorful pills on top of 100-dollar bills

Recently, House Speaker Nancy Pelosi released her caucus’s long-awaited proposal to lower the cost of prescription drugs. The bill, entitled “Lower Drug Costs Now Act of 2019” or HR 3, includes a number of provisions aimed at reducing drug prices. These provisions include allowing for direct price negotiations, reforming rebates under Medicare Parts B and D, and redesigning Medicare Part D to, in part, limit out-of-pocket costs for Medicare beneficiaries.

The most far-reaching section of the House Democrats’ bill allows the Secretary of the Department of Health and Human Services (HHS) to directly negotiate drug prices for Medicare and the private health insurance market. While the bill was in development, there was notable infighting among more moderate Democrats and their progressive counterparts due to concerns that the Speaker wasn’t going far enough to hold big pharma accountable. In addition, Republicans have generally opposed governmental price controls, with Senate Majority Leader Mitch McConnell already stating that the upper chamber would not “be calling up a bill like that.

Despite this initial opposition, House Speaker Pelosi appears poised to move forward with plans to potentially try to get a vote on the House floor by the end of October.

Here are some of the highlights of the House bill:

  • Empowers HHS Secretary to directly negotiate the prices of 25-250 drugs annually
    • The maximum fair price would be the upper limit of 120 percent of the Average International Market (AIM) price
      • So, what does that really mean? The AIM price is essentially the average price of a drug in Australia, Canada, France, Germany, Japan and the United Kingdom
    • HHS Secretary would take research and development costs and the availability of alternative treatments into account when negotiating
  • Imposes an excise tax on drug manufacturers’ annual gross sales if they fail to comply with negotiation requirement
    • Tax would start at 65 percent and increase by 10 percent by quarter up to a maximum of 95 percent for every quarter the manufacturer fails to comply
  • Levies a new inflation rebate on drugs in Medicare Parts B and D that would require drug manufacturers’ price increases to be tied to inflation
    • So, what does that really mean? If a drug company has increased the price of a drug beyond the rate of inflation, they must either lower it or pay a rebate to the Treasury
    • This provision has a retroactive clause dating back to 2016
  • Establishes a new annual out-of-pocket spending cap of $2,000 for Part D beneficiaries starting with plan year 2022

The President himself has not formally endorsed the Speaker’s bill but he did tweet “it’s great to see Speaker Pelosi’s bill today” after lending support to Senate Finance Committee Chair Chuck Grassley’s bipartisan bill. However, Senator Grassley’s bill is also facing opposition from within his own caucus. While it’s par for the course to see a division between Republicans and Democrats on an issue as big as drug-pricing, it is interesting that there is strong disagreement within each party. Nonetheless, I am hopeful that some type of bipartisan drug-pricing deal reaches the President’s desk since we are about to enter an election year.

Brittany McCullough photo

Brittany McCullough, Manager, Health Policy and Government Programs.

Brittany McCullough, URAC's Manager of Health Policy and Government Programs, tracks and analyzes legislation and regulations of importance to URAC stakeholders. She also helps manage URAC’s public policy external affairs portfolio and oversees compliance with government deemed programs. Most of her policy and research work has been related to the ACA, Medicaid managed care, Part D, telehealth and mental health parity. She holds a B.S. in Neuroscience and a Master of Health Administration.

Views, thoughts and opinions expressed in my articles belong solely to me, and not necessarily to my employer.

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