Speaker Nancy Pelosi to unveil bill for federally negotiated drug prices
After months of buzz from both sides of the aisle, Speaker Nancy Pelosi will today introduce her plan to allow the federal government to negotiate prices for 250 prescription drugs, setting up a showdown with a pharmaceutical industry working overtime to prevent it.
The need to limit drug prices is a rare point of agreement between President Trump and Democrats, although the president has yet to comment on the proposal and will likely face pressure to back a more conservative option or no bill at all. Republican Senator Chuck Grassley is reportedly lobbying his fellow party members on a more modest proposal he negotiated with Democratic Senator Ron Wyden in July.
The Pelosi bill would empower the Department of Health and Human Services to negotiate with companies on effectively national prices for the 250 most expensive prescription drugs without at least two competitors. The federal government is barred by law to negotiate drug prices for Medicare, as national services in other countries, such as the UK’s NHS do.
Negotiations would be pegged to the cost of drugs in those other countries under a proposed “international price index.” This is in line with the president’s stated position. In July, Trump announced he would sign an executive order limiting US prices to those paid in other countries — a legally dubious move — although there’s been little movement on that front since.
The White House has yet to comment on the plan, but the apparent interest alignment has scared investors and sent Pfizer and Merck stock on a gentle, Thursday morning slide.
There is “a palpable fear among some investors that Speaker Pelosi and President Trump may have a mind meld on drug pricing,” wrote Veda Partners analyst Spencer Perlman, according to Bloomberg.
Formally, the bill would likely repeal or work-around a provision in the 2003 Medicare Prescription Drug, Improvement, and Modernization Act. That bill gave medicare beneficiaries entitlement benefits for prescription drugs for the first time in a compromise deal that also prevented the US government from directly negotiating Medicare drug prices. In 2007, the Democratically controlled House passed a bill repealing the ban, but that law was assured a veto from President Bush and didn’t advance in the Senate.
The Pelosi plan would allow the government to negotiate on behalf of Medicare recipients and extend those benefits to the private market by steeply penalizing health insurances who refused to do so. Companies who refuse to negotiate would be penalized 65% of the gross price of the drug. Those who overcharge medicare or don’t extend the negotiated price to the private market would be fined 10 times the difference between the negotiated price and the sale price.
The plan would have retroactive elements designed to deal with recent price spikes that sparked national conversation. It would mandate pharmaceutical companies that have raised prices above the inflation rate since 2016 to lower the cost or pay rebates equal to the total price above inflation.
Grassley’s plan, far more limited in scope, would cap Medicare Part D recipients’ out-of-pocket pay at $3,100 starting in 2022. Those recipients are not covered under the 2003 law. Pelosi’s plan would cap their annual spending at $2,000.
According to NPR, Grassley has been telling Republican colleagues that if they do not coalesce around a moderate plan to bring to Trump, the president will side Pelosi on an issue popular among voters.
A July Kaiser Family Foundation poll found 79% of Americans thought the cost of drugs was “unreasonable,” although 74% of those who take them, said they were “easy” to pay for. The survey found 86% of respondents favored government negotiation of prices for people with Medicare, the third most popular policy option, behind making it easier for generics to hit the market and including prices in drug ads (a proposal the president has unsuccessfully tried to enact).
Americans rate the pharmaceutical industry dead last among 25 different industries, behind oil and gas and even the federal government itself.
The pharmaceutical lobby has amped up spending to unprecedented levels as public pressure on drug pricing swelled and the specter of government regulation loomed closer and closer.
Pharmaceutical companies have long argued such negotiations would stifle drug development and ultimately hurt consumers, both by long-term reducing the incentive for companies to invest in R&D and in instances where the government rejects the price and the treatment doesn’t become available, a dilemma showcased in Vertex’s recent fraught negotiations over CF drugs in the UK.
The same KFF poll found only 23% of people supported “allowing Medicare drug plans to exclude more drugs.”