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House Passes Pelosi Drug Pricing Plan

December 13, 2019 in Life Sciences News Public Policy by Denise Bell

BioUtah Opposes, Cites Harm to Innovation

On Thursday, the Democrat-led House passed H.R. 3, the Lower Drug Costs Now Act, by a vote of 230-192. The bill, a priority for Speaker Pelosi, mandates extensive price controls and passed largely along party lines. Only two Republicans in marginal districts voted for the legislation. President Trump vowed to veto the bill, but the Republican-controlled Senate has no plans to take up the package, which they view as overreaching. The Senate is focused on a separate, more modest bipartisan Finance Committee bill, S. 2543, the Prescription Drug Pricing Reduction Act. President Trump endorsed the Senate bill in a press statement on December 6.

In advance of the vote, BioUtah sent Utah House members a letter opposing the bill, noting that “the bill’s sweeping government price-setting measures, including Medicare negotiations and international price indexing, would significantly impede innovation in new cures while providing little relief to consumers…” Utah has a significant and growing biotech/biopharma sector. The bill could siphon $1 trillion from the industry and make it more difficult for smaller companies to attract the investment needed to research and develop cutting-edge medicines for some of our most challenging diseases.

Representatives Rob Bishop, Chris Stewart, and John Curtis voted against the bill and in favor of a Republican substitute based upon H.R. 19, the Lower Costs – More Cures Act—legislation Republicans had unveiled earlier in the week as an alternative to H.R. 3. Representative Ben McAdams voted for H.R. 3, but also supported the Republican substitute, which failed to pass. McAdams, who issued a statement calling for bipartisan action to lower drug prices, was one of only a handful of Democrats that voted with his Republican colleagues.

The Republican plan consists of bipartisan provisions that would lower drug costs by spurring generic competition without heavy-handed pricing regulation. It does not include Medicare negotiations, an international price index or a requirement that would force drugmakers to pay back Medicare for price hikes above inflation. During debate on H.R. 3, Republicans argued that the bill would hurt innovation and prevent new drugs and cures from coming to market.

A number of recent analyses from the Council of Economic Advisors statement, national BIO and the non-partisan Congressional Budget Office (CBO) , have sounded the alarm about the potential of H.R. 3 to divert investment in drug research and development and prevent as many as 100 new drugs from coming to market in the future.

The House-passed bill would require Medicare to negotiate the price of up to 250 of the costliest Part D drugs that don’t have competition from at least two generic, biosimilar or interchangeable biologics on the market. Private insurers could purchase drugs at the negotiated rates. Negotiated prices would be capped at 120% of the average prices in Germany, Japan, Canada, France, the United Kingdom, and Australia. Drug manufacturers who fail to negotiate would be hit with a steep excise tax on gross sales – starting at 65% of gross sales, up to a maximum of 95%. In addition, the bill would would require drug plans to rebate Medicare for drug price increases that exceed the rate of inflation. With the bill projected to save the federal government nearly $500 billion, Democrats added Medicare hearing, vision, and dental benefits to their bill.

In a nod to congressional progressives that had threatened to defeat H.R. 3 for not being strong enough, Speaker Pelosi agreed to increase from 35 to 50 the minimum number of drugs that must be negotiated each year, and require negotiation on some newly-launched drugs if their prices are more than the median U.S. household income.

The bipartisan Senate Finance Committee bill includes an inflation rebate provision, but its overall approach is less radical, rejecting Medicare negotiations and an international pricing model. The Administration supported the bill after Finance Committee Chairman Chuck Grassley and ranking member Ron Wyden slightly tweaked the bill. One change would cap the out-of-pocket costs a Medicare beneficiary would pay in any given month, to help spread the costs over time.

Drug costs are certain to be an important election issue for both Democrats and Republicans, and President Trump has proposed several pricing initiatives through rule making. Passage of H.R. 3 marks the beginning of further debate over how to tackle the high costs of drugs. That debate is certain to spill over into the new year.