Senate Dems cling to a simple majority to pass some of the biggest drug pricing reforms ever
The Pharmaceutical Research and Manufacturers of America — and their fleet of drug industry lobbyists on Capitol Hill — are known for never losing.
Whenever a big drug pricing bill comes up, an army of the industry group’s lobbyists descend onto the Hill and either smash it outright or dismantle it piece by piece.
But for perhaps the largest drug pricing reforms ever enacted, after more than a decade of Congress trying and failing to allow Medicare to negotiate prescription drug prices, those same lobbyists and their biopharma clients were dealt a stunning blow on Sunday afternoon.
Senate Democrats salvaged all 50 of their seats (plus Vice President Kamala Harris to break the tie) to hold off Republican amendments after more than a dozen hours of overnight voting to pass a wider-ranging tax and climate bill.
The win for the Senate Dems, teeing up another partisan thumbs-up vote in the House this Friday and a guaranteed President Joe Biden signature, means that for the first time ever, the federal government will be able to negotiate and/or set prices on some of the most expensive drugs that, via its Centers for Medicare and Medicaid Services, it pays for.
The bill also caps seniors’ out-of-pocket spending for prescription drugs at $2,000 per year — a historic move as some seniors on certain treatments spend upwards of $2,000 per month on their drugs.
“For too long, Medicare has been forced to contend with Big Pharma with one hand tied behind its back – that ends when this bill is signed into law,” Senate Finance Committee Chair Ron Wyden (D-OR) said in a statement after the win. “I have been spotlighting how the drug pricing system is broken top to bottom. At last, the Senate has begun to redefine the relationship between Medicare and Big Pharma.”
Dems in the House are eager to follow their Senate colleagues’ footsteps, with Rep. Frank Pallone (D-NJ), chair of the Energy & Commerce Committee, adding in a statement,
Nearly 20 years ago Republicans prevented the federal government from negotiating fair prices for seniors, and the Inflation Reduction Act reverses that egregious gift to Big Pharma, which will save seniors and Medicare money. This legislation finally levels the playing field and will help ensure seniors are no longer price gouged at the pharmacy counter. It also penalizes Big Pharma companies for unfairly hiking prices on seniors.
But the CMS negotiations on drug pricing have also been criticized as a slippery slope to wider, European-style price controls, closing off the biopharma industry’s biggest market, even if the passed negotiations will at first be limited to about 60 drugs between 2026 and 2029, and only for drugs and biologics that have already been marketed for about a decade or more.
PhRMA fumed over the negotiations, with CEO Stephen Ubl saying in a statement yesterday:
This drug pricing plan is based on a litany of false promises. They say they’re fighting inflation, but the Biden administration’s own data show that prescription medicines are not fueling inflation. They say this is “negotiation,” but the bill gives the government unchecked authority to set the price of medicines. And they say the bill won’t harm innovation, but various experts, biotech investors and patient advocates agree that this bill will lead to fewer new cures and treatments for patients battling cancer, Alzheimer’s and other diseases.
In latest text of drug provisions of Senate reconciliation: Manufacturers now have 3 options: Agree to whatever price HHS sets; pay a 95% tax on US drug sales (not just Medicare sales); or withdraw all a company's products from Medicare and Medicaid. And that's "negotiation."
— Ian Spatz (@rockcreekpolicy) August 6, 2022
And while PhRMA and others have said the bill will devastate biopharma innovation, tracking those changes over time will be difficult.
The Congressional Budget Office initially said 10 drugs would be lost out of a total of 1,300 drug approvals over the next three decades, but then quickly revised that number to 15 drugs, raising questions about its projection system. But Eli Lilly CEO David Ricks recently said his company would lose about 15 drugs from its own pipeline due to this bill.
The CBO also recently said that pharma companies might just jack up their launch prices for new drugs to make up for the later expected losses.
The bill “would increase the launch prices for drugs that are not yet on the market relative to what such prices would be otherwise. That effect would primarily be driven by the inflation-rebate provisions (sections 129101 and 129102), which would begin to apply to prices within 12 months of a given drug’s entering the market. Under those provisions, manufacturers would have an incentive to launch new drugs at a higher price to offset slower growth in prices over time. The negotiation provision (section 129001) would have less of an impact on launch prices,” CBO said in a letter to House leaders on Thursday.
But before the final vote Sunday, the legislation was slightly tweaked by the Senate parliamentarian on Saturday, dealing Democrats a blow on the size of those inflation-rebate provisions.
“I am disappointed that the calculation for the Medicare inflation rebate that included commercial units sold was ruled out of compliance, but the legislation nevertheless puts a substantial check on Big Pharma’s ability to price gouge,” Sen. Wyden said in an emailed statement.
Projections on how much that parliamentarian tweak will impact biopharma’s new drug prices, and bottom lines, were similarly complicated and couched in other projections, paralleling the complexities of the entire US drug pricing system.
Democrats also lost out on including a key piece of House-passed legislation that would cap insulin costs for all insured diabetics at $35 per month, a move favored by insulin giants Eli Lilly and Sanofi.
Dems failed to muster the 60 votes required to keep that cap in the bill, nabbing just 57, with the help of Republican Sens. Bill Cassidy (LA), Susan Collins (ME), Josh Hawley (MO), Cindy Hyde-Smith (MS), John Kennedy (LA), Lisa Murkowski (AK) and Dan Sullivan (AK). Now, the bill only caps insulin out-of-pocket spending for Medicare patients, just a small fraction of whom pay more than $35 per month.
Overall, however, progressive groups and Dems cheered the reforms kept in the package as historic.
David Mitchell, a cancer patient and founder of Patients For Affordable Drugs Now, said in a statement, “The Senate made history today with passage of the Inflation Reduction Act, which will lower prescription drug prices, improve health, fight inflation, and help Americans keep money in their pockets. The provisions help ensure patients will get the innovative new drugs we need at prices we can afford.”
Laura and John Arnold, billionaire co-founders of the philanthropy Arnold Ventures, similarly added:
Allowing Medicare to negotiate for the prices of certain drugs and capping out-of-pocket costs in the program take steps toward meaningfully improving affordability while maintaining incentives for true innovation. Prescription drugs don’t work if patients can’t afford them – yet today nearly 1 in 3 Americans finds themselves unable to pay for the medications they need. It is disappointing, however, that the inflation rebate provisions intended to keep rapid price escalations in check won’t ultimately be extended to all Americans.
As far as which particular drugs might see the biggest hit on their profits as the bill takes effect, SVB Securities explained to investors recently how more than a dozen drugs from Eli Lilly, AstraZeneca, AbbVie and J&J, would lose out just before their generic/biosimilar competitors hit the market.