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House Democrats’ Drug Pricing Bill Heads to a Floor Vote

October 25, 2019

Speaker Pelosi’s drug bill, H.R. 3, now named the Elijah E. Cummings Lower Drug Costs Now Act, after the longtime congressman who died last week, heads to the floor for a vote after being considered by three House Committees – the Energy and Commerce, Labor and Education and, Ways and Means Committees. A full House vote on the bill is expected by the end of October.

The bill is likely to pass the Democrat House on a party-line vote, with significant opposition by Republicans who argue that the bill will hurt innovation and prevent new drugs and cures from coming to market. They support more market-based solutions. A recent Congressional Budget Office (CBO) analysis  found that although the measure would save Medicare about $345 billion over a decade, the bill would prevent at least 8-15 new drugs from being developed. Many experts believe that this number is woefully underestimated, given that it takes about at least15 years to get a new drug to patients.

In a statement  on H.R. 3 and the CBO report, BIO President and Chief Executive, Jim Greenwood said: “This assault on an innovative industry will be especially devastating for patients – as CBO admits that patients will see access issues. It will also devastate smaller biotechs that lead 7 in 10 clinical trials and are scattered in communities all across the country…” PhRMA has said the bill would result in a $1 trillion-plus hit on biopharma innovators over 10 years, with a loss of about 1 million U.S. jobs.

Over the last few weeks, reports have surfaced of conversations between Pelosi’s office and the White House about exploring a possible “deal.” In the past, the President has signaled support for the idea of direct negotiations, as well as an international price index. However, given rising tensions between Democrats, Republicans and the White House over the impeachment inquiry, reaching any kind of agreement – even on pieces of the plan – are given long odds. Senate Majority Leader Mitch McConnell has said the House Democrat drug plan would not pass the Senate, ensuring that the bill, in its current form, would never reach the President’s desk. The bigger question is whether all sides could find common ground on any drug pricing reforms, such as transparency and the restructuring of Part D before the end of the year.

While some changes to H.R. 3 were made in Committee, notably increasing from 25 to 35 the minimum number of drugs the Health and Human Services Secretary would be required to negotiate per year (plus insulins), key provisions of the bill remain intact. The bill would allow the federal government to directly negotiate lower prices for up to 250 of the costliest Part B and D drugs that have no generic competition, and extend those discounts to private health plans in the U.S. The ceiling for price negotiations would be set at 120% of an average international market price based on an index of six foreign countries (Australia. Canada, France, Germany, Japan and the United Kingdom).

Negotiated prices could be lower, but not higher than the indexed pricing. Manufacturers that fail to negotiate or reach agreement on price would be hit with a steep excise tax on gross sales – starting at 65% of gross sales, up to a maximum of 95%. These severe penalties imposed on drug companies have led opponents to suggest that the so-called “negotiations” are nothing more than government price-setting. In addition to the heavy-handed price control mechanisms, H.R. 3 includes an inflation rebate for Part B and Part D drugs, which would require drug plans to pay a rebate to the federal government if their price for a drug increases by more than the rate of inflation. A similar rebate proposal has been included in legislation passed by the Senate Finance Committee, S. 2543, the Prescription Drug Pricing Reduction Act. The rebate proposal has drawn sharp criticism from PhRMA and BIO as well as Senate Republicans. Senator Chuck Grassley, Chair of the Senate Finance Committee that produced S. 2543, has stated that only a bipartisan bill stands the chance of being signed into law, and points to his legislation as the only plan that has had the support of both Democrats and Republicans.

In an interesting twist, some of the more liberal leaning members of the House Democrat caucus say that H.R. 3 doesn’t go far enough in allowing direct negotiations for Medicare. The STAT has put out an article noting that a Congressional Research Service report could find certain elements of H.R. 3 unconstitutional.

Worth a Read:

Article by Sue Peschin, President and CEO of the Alliance for Aging Research, and Duane Schulthess, Managing Director of Vital Transformation) on why International Price Indexing won’t work.

Avalere Analysis: Impact of H.R.3 on Federal Spending and Drug Manufacturer Revenues