Legislators sparred about the best way to lower drug prices during a Sept. 25 hearing, bickering along partisan lines over new legislation by U.S. House Speaker Nancy Pelosi, (D-Calif.) that would require Medicare to negotiate drug prices with manufacturers.
The more than 4-hour hearing by the House Committee on Energy & Commerce Subcommittee on Health centered on HR 3, the “Lower Drug Costs Now Act of 2019,” introduced by Speaker Pelosi on Sept. 24, which would compel the Centers for Medicare & Medicaid Services to make deals with manufacturers on the maximum, reasonable price for the top 250 highest-cost drugs. If a drug maker refused to participate in the negotiation, the company would face a steep noncompliance fee, according to the bill, while manufacturers that overcharged Medicare or failed to offer the negotiated price would be subject to a civil penalty equal to 10 times the cost difference. The legislation includes a $2,000 out-of-pocket limit for Medicare patients.
If enacted, the legislation would transform the pricing landscape of medications and allow more families to access needed treatments, Speaker Pelosi said during the hearing.
“What it does, as you know; it ends the ban – imagine, there’s a ban on negotiating for lower drug prices,” she said. “So, it ends the ban for the [U.S. Department of Health and Human Services] Secretary now to have the opportunity to negotiate for lower prices. But, the even better news is that these drug prices will be lower not just for Medicare recipients, which was one of the original proposals, but for everyone. It will stop companies from ripping us off by charging five times, four times, three times what is charged in other countries.”
However, Republican legislators spent much of the hearing criticizing the bill, claiming the legislation was crafted behind closed doors by Democrats who made no efforts to gain Republican feedback.
“There is no debate that Republicans and Democrats want to work together to lower drug cost for consumers,” Ranking Member Greg Walden (R-Ore.) said during the hearing. “Madam chair, I have to strongly express my great frustration about the decision to sabotage both the tradition of this committee and the bipartisan work that you know was well underway to tackle high-cost drugs. ... We’ve worked in a bipartisan way up until now. I thought we were headed in a good faith down that same path until the speaker’s office dropped this partisan plan on our [progress]. This is partisan politics at its worst, and it’s an avoidable failure.”
Amid the partisan squabbling, legislators heard differing views from economists about the logistics of the legislation and whether the pricing negotiation model makes sense for the United States.
Gerard F. Anderson, PhD, a professor at Johns Hopkins University and director of the Johns Hopkins Center for Hospital Finance and Management in Baltimore told congressional leaders that negotiation between the government and drug makers is both possible and results in lower prices, even for drugs without therapeutic competition. He noted that the Medicaid program currently negotiates prices for supplemental rebates and that the Veterans Administration and the Department of Defense routinely negotiate discounts greater than the federal supply schedule. Dr. Anderson estimated that the Veterans Administration and the Department of Defense pay an average of 30%-40% less than Medicare prescription drug plans for the same medications.
“Allowing the federal government to negotiate prices for expensive drugs without competition in both the public and private sectors will be more effective in lowering drug prices for everyone,” Dr. Anderson said during testimony. “ Imposing financial penalties for drug companies will bring them to the table. International prices can be used to determine if the drug company is negotiating in good faith.”
But Benedic Ippolito, PhD, a research fellow for the American Enterprise Institute, Washington, raised concerns the legislation may cause reduced innovation. He said the United States accounts for about 60% of drug spending in the developed world, and that, because the market is so large, changes in spending will have first-order implications for the types of future drugs available, Dr. Ippolito said during testimony.
“Consider the incentives associated with the [bill’s] negotiation process,” he said. “Drugs that have no competitors would be subject to aggressive rate regulation by the [HHS] Secretary. The same is not true of drugs with at least one such competitor. It is entirely possible that being a second market entrant could prove substantially more profitable than bringing a novel therapeutic to market. Thus, the proposal could substantially depress incentives to pursue path-breaking drugs.”
Outside the hearing, Speaker Pelosi’s proposed bill is being praised by some physician groups, including the American College of Physicians. In a statement, ACP President Robert McLean, MD, said the college was pleased that the bill focuses on keeping drugs affordable for patients and includes provisions that would support research into new therapies and treatment options.
“ACP specifically supports the provisions that would allow Medicare to negotiate prices with manufacturers,” Dr. McLean said in the statement. “The College has longstanding policy supporting the ability of Medicare to leverage its purchasing power and directly negotiate with manufacturers for drug prices. Although ACP does not have policy on several of the specific provisions in the bill, we are supportive of its overall goals and direction, particularly the emphasis on negotiation and transparency in drug pricing.
Meanwhile, Senate Finance Chairman Charles E. Grassley, (R-Iowa) and Ranking Member Ron Wyden (D-Ore.) released the statutory text of their own drug-pricing legislation on Sept. 25, titled “the Prescription Drug Pricing Reduction Act of 2019 (S-2543).” The bill calls for a number of changes to the Medicare Part D program, such as reduced beneficiary cost sharing and linking drug price increases to the rate of inflation. The legislation would also make more information available regarding pharmacy benefit manager practices and change how Medicare calculates Part B prescription drug payment amounts to lower spending and out-of-pocket costs for patients.
“President Trump has called on Congress to work together on a bipartisan bill to lower prescription drug prices, [and] there’s only one bipartisan bill in Congress to lower prescription drug prices that’s passed the committee process,” Chairman Grassley said in a statement. “This is it. Making prescription drugs more affordable consistently ranks as a top issue for Americans from every corner of the country. I encourage my colleagues on both sides of the aisle to come to the table and work with us to get a bill passed and signed into law.”