Medicare Drug-Negotiations Bill Approved by House Committees

Kerry Dooley Young

October 18, 2019

Two House panels on Thursday advanced a Democratic bill that would let the federal government enter negotiations with pharmaceutical companies for the price of certain drugs covered by Medicare Part D pharmacy plans.

The House Energy and Commerce Committee voted 30-22 on Thursday evening to approve the bill, which was developed under the direction of Speaker Nancy Pelosi (D-CA). Earlier on Thursday, the House Education and Labor Committee also voted 27-21 to approve the measure. A third panel, the House Ways and Means Committee, may mark up the measure next week.

The bill represents the Democrats' proposition in the debate over how to make drugs more affordable for Americans. Democrats on Thursday highlighted the potential savings from their proposal for direct negotiations.

In a preliminary look at the bill, the Congressional Budget Office (CBO) estimated $345 billion in potential federal savings over a decade from giving Medicare negotiating authority for Part D drugs. But Republicans emphasized a prediction in the same CBO report that eight to 15 fewer new drugs might reach the market if the Democratic bill were enacted.

"What if one brought relief to sufferers of arthritis and another the cure for childhood cancer? Truth is none of us knows which cure or which medicine will never get invented or approved," said Rep Greg Walden of Oregon, the ranking Republican on the Energy and Commerce Committee. "But what we do know is up to 15 — and some of us believe many more — will never enter or leave a lab or a trial or find their way to a sick or dying patient."

Democrats countered that their measure reflects an approach previously endorsed by the nation's top Republican. President Donald Trump has called for negotiations on drug prices in the past, said Energy and Commerce Chairman Frank Pallone Jr (D-NJ). As a presidential contender in 2016, Trump said he would "negotiate like crazy" on drug prices.

"I don't agree with the president very often to be perfectly honest, but in this case, he is right on the money," Pallone said. "He understands how important this issue is to the American people."

About three in 10 US adults age 50 to 64 — about one fourth of those age 65 and older covered by Medicare and one fifth of those younger than age 50 — reported difficulty affording their prescription medicines, according to February polling data reported by the Kaiser Family Foundation.

Rep Mike Doyle (D-PA) referred to this statistic when making a case at the markup for the Democratic bill.

"We don't like to think about anyone struggling, let alone our parents or sick neighbors, but that's the truth," Doyle said. "Americans are struggling to afford the medicine they need to stay alive."

House Democratic leaders have spoken of plans to bring the bill to the House floor for a vote, perhaps as early as this month. Pelosi endorsed the idea of naming the Democratic drug bill for Rep Elijah Cummings (D-MD), whose death was announced Thursday. Cummings had been a leader in efforts to look for ways to lower the costs of medicines.

Pelosi also said Democrats may need to reconcile changes made to the bill by the different committees before it would reach the floor for a vote.

Democrats have already begun to tweak their bill. Both committees that acted Thursday approved amended versions of the measure. The Energy and Commerce and the Education and Labor versions of the bill would direct the Department of Health & Human Services to identify "at least 25 negotiation-eligible drugs" in a start-up phase from 2023 to 2027.

For 2028 to 2032, the target moves to 30 drugs and then rises to 35 drugs in 2032. The aim would be to lower prices on some of the most costly medicines for the Part D program.

The original version of the Democratic bill, introduced in September, only set a target of "at least 25 negotiation-eligible drugs" by 2023.

Shared Approach

The Democratic House bill intends to use a bargaining strategy for Part D that the Trump administration has at least considered as a concept: pegging Medicare payment for drugs to prices paid by other rich nations.

The House bill proposes developing a cap for its negotiations based on 120% of an average international market price. This would be based on prices paid for drugs in Australia, Canada, France, Germany, Japan, and the United Kingdom.

Last year the Trump administration sought feedback on whether it should test an international pricing index model for drugs administered in physicians' offices, which are covered by Medicare's Part B program. Many cancer and rheumatoid arthritis medicines are covered by Part B.

Medicare has no negotiating strategy for specific drugs covered by Part B. Instead, it pays a premium of about 4% of the reported average sales prices for these medicines.

Lawmakers in both parties have been concerned about the rising growth in Part B pharmaceutical expenses. Spending on Part B drugs rose from $15.4 billion in 2009 to $32.0 billion in 2017, according to Medicare Payment Advisory Commission testimony presented to the Energy and Commerce Committee in April.

With Part D, Medicare leaves the bargaining to the competing insurers who administer its pharmacy program. Republicans say this approach fosters innovation while holding prices in check; Democrats argue that using insurers as middlemen squanders Medicare's bargaining clout. Part D spending rose from $60.8 billion in 2009 to $100 billion in 2017, according to Medicare's board of trustees.

Other developed nations already negotiate directly with drugmakers, Doyle said at the markup.

"Pharmaceutical companies are still making money overseas. If they weren't they wouldn't be in those markets," Doyle said. "We've not done what our constituents have been asking us to do for years — negotiate on their behalf so they don't have to keep working into their 80s to pay for medicine, or choose between medicine or food, or raise money online."

Several Republicans at the markup said Senate Majority Leader Mitch McConnell (R-KY) will not bring the House Democrats' drug bill to the floor of his chamber for a vote. But McConnell may be willing to proceed with a narrower measure addressing drug spending that has bipartisan support, they suggested.

Walden noted that there is broad agreement about capping how much people enrolled in Medicare Part D must contribute to the cost of drugs. In their bill, House Democrats proposed capping annual Part D out-of-pocket costs at $2000. A bipartisan bill from the Senate Finance Committee would instead create an annual cap starting at the $3100 level in 2022.

Walden suggested opting for the Senate Finance Committee's higher number for the Part D cap. Members of the House and Senate could then try to proceed with a bill focused more on this bipartisan amount, he said.

"Clearly all of us want to do the right thing here for seniors and give them certainty and surety and a cap on what their out-of-pocket costs will be," said Walden. "We want something that will become law."

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