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Prescription Washington

House and Senate at Odds on Drug Pricing Legislation

Neither bill will pass as is but there’s room for compromise
Stephen Barlas

Momentum in Congress to pass legislation aimed at slowing down prescription drug price increases seems to have slowed as Democrats and Republicans are at loggerheads over competing solutions. However, given the heated criticism of pricing by drug manufacturers from both parties, Congress is likely to do something, perhaps passing legislation forcing companies to provide transparency on costs of drug development and other pricing factors. 

Key committees in both houses of Congress have passed separate bills. The Democratic House bill is called the Lower Drug Costs Now Act (H.R. 3). It passed three separate House committees with nary a Republican “yea.” It was expected to be approved by the House sometime before the end of 2019 and, again, probably along party lines. 

The Senate bill, which was approved by the Senate Finance Committee, is called the Prescription Drug Pricing Reduction Act (S. 2543). The legislation represents the bipartisan work of the Republican chairman, Sen. Chuck Grassley of Iowan, and ranking Democrat, Sen. Ron Wyden of Oregon. The bill, which has not come to the Senate floor as P&T went to press, passed the committee by a vote of 19-9. Every Democrat voted for the bill, but most of the Republicans, with the exception of Grassley and a few others, voted against it.

Both the House and Senate bills have many provisions aimed at lowering drug prices for seniors, and, in some cases, all consumers. The bills would also reduce costs for the Medicare and Medicaid programs. But the key provisions in each attempt to limit drug price increases and introductory prices, but they do so in very different ways. That divergence is the main reason neither bill will pass Congress as is.

Republican support of the Senate bill is doubtful because many in the party see the provision in the bill that forces down manufacturers’ prices as federal price controls, a characterization that Grassley and Wyden refute. The provision they are arguing about would require prescription drug and biological manufacturers to pay a rebate to Medicare equal to the difference between their price hikes for Medicare Part B or D drugs or biologicals and the inflation rate, as measured by the Consumer Price Index for All Urban Consumers (CPI-U). 

Adding to the bill’s political tribulations is a threat by Wyden to withdraw Democratic support unless a vote is held on the Senate floor on cementing insurance protections for people with pre-existing conditions. 

In the House, the partisan divide is clear and thorough: Democrats are solidly behind the bill and the Republicans just as solidly against it. The legislation, which was put together with strong input from House Speaker Nancy Pelosi, would allow the Health and Human Services secretary to directly negotiate prices of drugs that are determined to contribute the most to Medicare drug costs and are without generic competitors. As written, the legislation says that a minimum of 25 drugs can be on that list and a maximum of 250 drugs. Drug manufacturers who opt out of accepting the secretary’s negotiated rates would incur steep penalties, beginning at 65% of the drug manufacturer’s gross sales of the drug from the prior year. For every quarter the drug manufacturer elects not to participate, the penalty would increase by 10%, with a maximum penalty of 95% of a drug’s gross sales. Like the Senate bill, the House bill has less controversial other provisions, such as reducing out-of-pocket costs and creating discount programs for eligible Medicare beneficiaries.

The Pharmaceutical Research and Manufacturers Association (PhRMA) opposes both the Senate and House bill. “If H.R. 3 becomes law, it is lights out for a lot of very small biotech companies that are pre-revenue and depend on attracting capital,” Steve Ubl, PhRMA CEO told reporters in October. A PhRMA blog criticizes the Senate bill this way: “Unfortunately, the Senate Finance Committee has pushed for changes that would upend Part D without any immediate and meaningful savings for most patients at the pharmacy counter.”

Some patient advocacy groups are concerned that the Pelosi bill will cause drug manufacturers to tap the brakes on drug development. But other groups, like AARP, support the legislation and the stated intent of reining in drug prices.

The near certainty that neither bill will pass as is doesn’t mean that there isn’t room for compromise. For example, the Senate bill has a provision that requires companies to report “documentation to justify price increases” in 2021 for drugs with price increases of 100% in the preceding 12 months or at least 150% in the preceding two years. The numbers change slightly in successive years. The House requires reporting on drug price increases of 10% in one year or 25% over three years. Compromise legislation might find a middle ground between the two bills.

Stephanie Kennan, a senior vice president at McGuireWoods Consulting, a major lobbying firm who was health policy advisor to Sen. Wyden for about 10 years, says, “The House has passed bills that reflect some of the provisions in the Senate Finance Committee’s proposal. It would make sense that some form of the Senate Finance Committee’s bill becomes the base of a compromise.”

Author bio: 

Mr. Barlas is a freelance writer in Washington, D.C., who covers issues inside the Beltway. Send comments and ideas for topics to sbarlas@verizon.net.