CBO projects Senate drug pricing bill would cut the development of 10 drugs over 30 years
The Congressional Budget Office on Friday said that Senate Democrats’ proposal to allow Medicare to negotiate certain drug prices could lower the federal deficit by about $288 billion through 2031, and reduce drugmakers’ 1,300 total drug approvals by about 10 drugs over the next three decades.
That trade-off, part of a larger Senate reconciliation package only needing a simple majority of votes to pass, finds a middle ground among the other recent Congressional attempts to stem rising drug prices.
CBO said Friday that the chilling effect on the number of drugs introduced to the US market would be about one drug over the first 10-year period, or 2023-2032, and about nine others over the next two decades. With expectations for about 1,300 drug approvals over the next 30 years, the CBO’s estimate means the number of drugs lost due to this legislation amounts to less than 1% of estimated approvals.
For House Speaker Nancy Pelosi’s drug price negotiation bill, known as HR 3 and which sought deeper pricing cuts, CBO predicted at the time that it would result in 59 fewer new drugs over three decades.
“The reason the number is smaller is that the package has changed over time,” Rachel Sachs, a law professor at Washington University in St. Louis told Endpoints News. “The negotiation provisions now not only apply to fewer drugs, but they are formally limited in that they only begin after a drug has been on the market for a certain amount of time. So companies have a period of time during which negotiation is not present. CBO likely considered that, as well.”
But one thing the CBO doesn’t consider is what types of drugs might be affected. As with other drug pricing CBO scores, the budget office made clear again that it “did not predict what kind of drugs would be affected or analyze the effects of forgone innovation on public health.”
The office recently published a look at the updated version of its model used to inform estimates of the effects of HR 3 on the number and timing of new drugs entering the US market.
In a January slide deck on its new model, CBO added, “A price negotiation policy would have little effect for the first ten years, but in the long run, such a policy would decrease the number of new drugs entering the market by 10%.”
While PhRMA and other industry groups have lamented this potential for major losses to innovative medicine due to drug pricing provisions, some of these estimated pipeline cuts may come from me-too drugs, other later entrants, or even copycat drugs.
The generic drug industry group, the Association for Accessible Medicines, and its Biosimilars Council on Monday came out in opposition to the new Senate pricing reforms, saying they will majorly increase risks for generic and biosimilar manufacturers as the companies will have “no way to know whether a brand-name drug will be selected for negotiation or what the negotiated price may be” until well after a copycat’s development would need to already begin.
The CBO estimate on government savings also doesn’t match Pelosi’s former drug price negotiations bill, which the CBO scored in August 2021 as saving $456 billion over 10 years, although it’s considerably more than the Senate Dems’ last attempt at Medicare negotiations via the Build Back Better Act that Sen. Joe Manchin (D-WV) squashed, and which the CBO said would save about $76 billion over 10 years.
Senate Dems last week unveiled the new legislative language around Medicare drug price negotiations, which beginning in 2026 would allow for the negotiation of 10 eligible drug prices, and build up to 20 drugs by 2029.
For companies that don’t comply, CMS can assess penalties of up to $1 million per day, according to the bill text. And any manufacturer that “knowingly provides” false information also can be subject to fines of $100 million per infraction.
The Senate proposal, which mirrors the previous efforts in the Build Back Better Act, would also cap seniors’ drug costs under Medicare at $2,000 annually, but it noticeably does not include a $35 monthly cap on insulin costs for those with insurance, which Sen. Chuck Schumer (D-NY) has twice pledged to vote separately on.