Senate Finance Committee Approves Drug Pricing Bill

July 26, 2019

On Thursday, the Senate Finance Committee passed the Prescription Drug Pricing Reduction Act (PDPRA) aimed at cutting drug prices in Medicare Part B and Part D, and Medicaid. The bill, crafted by committee Chairman Chuck Grassley (R-IA) and ranking member, Ron Wyden (D-OR), passed on a bipartisan vote of 19-9, with nine Republicans voting against the measure. The sweeping bill advanced virtually unchanged from its initial release. Key provisions and committee actions are outlined below.

Inflation Rebate
International Price Index 
One provision that drew sharp criticism from a majority of Republicans on the committee would require drug manufacturers to pay rebates to Medicare when the prices of their Medicare Part D drugs increase at a rate faster than inflation, as measured by the Consumer Price Index for All Urban Consumers (CPI-U). The inflation cap for Part D would be based upon the manufacturers price in the private market, and would exclude biosimilars, generics and drugs on the FDA shortage list.

Senator Pat Toomey (R-PA) offered an amendment to strike this rebate plan from the bill, arguing that the policy is tantamount to price controls that would unravel competition in the market-oriented Part D program and harm innovation, without necessarily lowering out-of-pocket drug costs for seniors. The rebates would go to the Medicare Trust Fund. Some have suggested that the rebate structure could create a perverse incentive for drug manufacturers to hike the initial launch  price of new drugs, knowing price increases would be limited down the road.

The Toomey amendment was narrowly defeated on a tie vote, setting the stage for further debate on this controversial issue in the Republican-controlled Senate. Chairman Grassley and Senator Bill Cassidy (R-LA), both Republicans, joined Democrats in opposing the amendment. A similar rebate plan is included in the bill for Part B brand-name drugs. Under the Part B plan, drug manufacturers would be required to reimburse Medicare for Average Sale Price (ASP) increases above inflation.

Senator Toomey, a strong opponent of price control mechanisms, also offered an amendment to prohibit implementation of an international price index for drugs, which the White House supports. However, in another close tie-vote, the amendment was not agreed to. BioUtah has opposed using price controls to lower drug costs, whether through an international price index or other types of government-mandated pricing.

Part D Benefit Restructure
Besides imposing a Part D inflation rebate, the bill would restructure the current Part D drug benefit by capping seniors’ out-of-pocket costs and shifting more of the payments for the catastrophic coverage phase to drug manufacturers and health plans, rather than Medicare. Intended to discourage the use of high-cost drugs, once seniors reach a $3,100 threshold in drug spending, catastrophic coverage would be triggered. Health plans would be required to pick up 60 percent of the drug costs in the catastrophic phase, while drug manufacturers and Medicare would pay 20 percent each. Currently, Medicare is responsible for 80% of the drugs costs in this phase.

Changes to Part B Drug Pricing (ASP)
Part B drug pricing did not escape scrutiny in the bill. In addition to the Part B inflation rebate, the bill would require drug manufacturers and biosimilars to include the value of discount coupons provided to privately insured patients in calculating the Average Sales Price (ASP), which is the basis for Part B drug reimbursement. Currently, manufacturers are not required to include these types of price discounts.

Concerns have been raised about the impact of this new calculation on patients and providers. The new requirement could cause manufacturers to stop providing coupons altogether, which hurts patients. Alternatively, if manufacturers continue to offer coupons, payments for Part B drugs could fall below what providers need to keep offering these critical drugs.

BioUtah supports efforts to protect access to Part B drugs. We recently signed onto a letter, signed by 104 clinical care providers and advocacy organizations, urging Senate Leadership to reconsider the Part B changes included in the Senate Finance bill.

Pharmacy Benefit Manages
The bill would allow the Federal Trade Commission (FTC) and Department of Justice to look into the practices of pharmacy benefit managers (PBMs), including business practice data that is currently confidential under Medicare, to increase transparency around their role and impact in determining Part D drug costs.

Medicaid
Under the bill, states could negotiate with drug manufacturers for long-term payment arrangements for expensive gene therapies. These treatments often put a strain on state budgets.

Industry Response

The drug industry is generally concerned that the bill, while producing savings on paper, does not do enough to benefit patients and reduce out-of-pocket drug costs. In a statement issued after the bill was passed, Stephen Ubl, president and chief executive officer of PhRMA, said the legislation was the wrong approach to lowering drug prices. “It would siphon more than $150 billion from researching and developing new medicines and give those savings to the government, insurers and PBMs, instead of using those savings to lower costs for seniors at the pharmacy counter,” he said.