House Democratic leaders on Thursday unveiled an aggressive plan to lower drug prices through negotiations between federal health officials and the makers of some of the most expensive drugs.
Speaker Nancy Pelosi ushered the proposal through months of closed-door meetings primarily with other Democrats and experts on drug pricing.
But she and other Democratic leaders also incorporated ideas from legislation introduced in July by the top Republican and Democrat on the Senate Finance Committee and backed by President Donald Trump, including capping drug prices based on the rate of inflation — a measure that other Republicans said they would not support.
Democrats are also somewhat divided on this plan. Progressives in the House were quick to say the plan does not go far enough.
Even if the proposal never gets a vote, it offers congressional Democrats something they need with a little more than 13 months left before Election Day: a unifying message on an issue that most voters say is their biggest health care concern.
What’s all the fuss about? Let us walk you through it.
What’s In This Plan, Anyway?
The legislation, called the “Lower Drug Costs Now Act,” was formally introduced by Rep. Frank Pallone (D-N.J.), who is the chairman of the House Energy and Commerce Committee, one of the panels with jurisdiction over the bill. The measure would restrict the ability of drugmakers to charge essentially whatever they want on brand-name drugs that have no competition on the market. Specifically, its changes would include:
- A requirement that the secretary of Health and Human Services negotiate the prices of “as many as possible” of the 250 most expensive drugs marketed in the United States that lack at least one generic or biosimilar competitor. HHS would have to negotiate at least 25 drugs annually, addressing the concern that requiring more could overwhelm health officials.
- Steep penalties for drugmakers who refuse to negotiate or comply with the outcome, equivalent to 65% of the drug’s annual gross sales, escalating up to 95% over time. There would also be penalties for overcharging, for example.
- Limits on price increases for drugs covered under Medicare Part B (which includes treatments at doctors’ offices and dialysis centers) and Part D (referring to prescription drug plans). Those price increases would be restricted to the rate of inflation, including retroactively those that have risen since 2016. Drugmakers could either lower their price or pay the difference to the government as a rebate.
- A $2,000 cap on the amount Medicare beneficiaries pay out-of-pocket for prescription drugs every year.
Outlining how the HHS secretary would determine which drugs to negotiate, the plan says HHS would identify the target drugs each year with the highest aggregate cost, meaning they would take into account the price and the volume of sales.
HHS would be required to negotiate the price of insulin, the proposal adds, singling out the lifesaving diabetes medication with sky-high costs that have spurred outrage at drugmakers this year.
The legislation would aid negotiations by creating a maximum price called the Average International Market price. Drawing on the idea of an international pricing index — which Trump has said he supports but that many Republicans dislike — the so-called AIM would be the average price of a drug in six countries (Australia, Canada, France, Germany, Japan and the United Kingdom) weighted on the basis of sales volume.
The goal of negotiations would be to establish “a maximum fair price,” which would be no more than 20% higher than the AIM, the plan says.
Who Would Benefit From This Plan, And How?
In short, all Americans would benefit from the pricing negotiations. The plan says the price would be available to all payers, not just the federal government, meaning drugmakers would have to offer the same deal to everyone.
The rest of the legislation offers benefits largely for Medicare beneficiaries, even suggesting that, if the drug savings were enough, it could mean expanded coverage, including adding services for vision, hearing and dental care.
It is legislation tailor-made for an election year. A Kaiser Family Foundation poll released last week showed 70% of the public said lowering prescription drug prices should be a major priority for lawmakers — more than any other health care issue. (Kaiser Health News is an editorially independent program of the foundation.)
It also helps that older Americans tend to be the most reliable voters, a trend that may explain why Medicare issues often come up around election season.
What Are The Critics Saying?
This legislation puts “politics over progress,” said a statement attributed to every Republican on the House Energy and Commerce Committee.
It is “more accurately a ‘dictate or destroy’ price control power that will halt valuable research into new lifesaving medicines and give foreign countries dangerous influence over America’s health care system,” said Rep. Kevin Brady of Texas, the top Republican on the House Ways and Means Committee, which also would oversee the proposal.
“We do not need to blow up the current system to make medicines more affordable,” said Stephen Ubl, head of PhRMA, the pharmaceutical industry’s trade group.
To sum it up, Republicans and the drug industry generally oppose efforts that would:
- allow the government to negotiate drug prices.
- tie drug prices to the lower prices paid overseas.
- limit how fast drug companies can raise their prices.
They argue such measures interfere with the free market.
But Trump has broken with his party on some of these issues. The Office of Management and Budget is reportedly working on a proposal to create an international pricing index pilot project after Trump endorsed the idea. He has also expressed support in the past for empowering the government to negotiate drug prices.
Shortly before his inauguration, Trump commented that drug companies have been “getting away with murder” and vowed to change that, sparking occasional speculation about a Trump-Pelosi alliance on drug pricing. But with the 2020 presidential election season underway, it seems unlikely the pair would want to hand each other a policy victory.
In addition, progressive Democrats have expressed opposition to the plan, objecting to how little input they feel they were given in its consideration and its relatively modest scope by requiring only 25 drugs be negotiated.
Will This Become Law?
Let’s zoom out for a moment. In July, the Senate Finance Committee members considered their leaders’ more modest drug-pricing proposal that would cap both the prices paid by Medicare to the rate of inflation and the out-of-pocket drug costs of seniors, as the Democratic leaders’ plan would.
The committee’s Republican chairman, Sen. Chuck Grassley of Iowa, a respected and powerful voice on the issue, had poured his efforts into the legislation, which incorporated policies Trump had supported.
Still, most of Grassley’s fellow Republicans warned him they would not support his measure if the full Senate voted on it.
While frustrated with his colleagues, Grassley noted during the hearing that he shared their opposition to two other ideas that would turn up in the eventual Pelosi plan: the international pricing index and HHS negotiations on drug prices.
“I don’t think that you’re going to get 60 votes in the United States Senate,” Grassley said of the idea of negotiations at the time.
The takeaway is that the odds aren’t in Democrats’ favor. There is strong, established Republican opposition to many of the ideas included in the Democrats’ plan, with plenty of drugmaker money flowing into congressional coffers to keep it that way.
What Happens Next?
The Energy and Commerce Committee has scheduled a hearing on the bill next week.
Democrats, who control the House, have said they are hoping for a vote in the next couple of months. But even if it passes the House, Senate Majority Leader Mitch McConnell, who controls what comes to the Senate floor, could pass on bringing it up for a vote at all.
Instead, the legislation may largely offer Democrats a potent talking point as Election Day 2020 approaches, giving them an ambitious proposal to point to as evidence that they are listening to voters’ concerns — just as congressional Democrats hammered Republicans for not protecting those with preexisting conditions during the 2018 midterms.