US Drug Pricing Bill’s Prospects Will Be Shaped By Whether Public Worries More About Access Than Cost

HR 3 has been re-introduced, and some provisions may be attached to the White House’s infrastructure bill, but the government price negotiation system envisioned by the bill may fail – if industry can convince Congress to focus on access to medicines, not their cost.

Re-Introduction Of HR 3 Starts The Conversation On Drug Pricing In Earnest

Prospects for legislation establishing a US government pricing negotiation system for drugs will hinge on whether arguments about heavy-handed policies significantly hampering innovation and restricting access can dominate the public’s attention versus arguments about the need for lower drug prices.

Those competing arguments were on display with the announcement on 22 April that the leaders of the three key health committees in the House reintroduced HR3, the comprehensive drug pricing reform bill that passed the full House in 2019.

“This historic legislation will lower the cost of prescription drugs and build a fairer system for consumers,” according to the statement by Energy & Commerce Committee chair Frank Pallone, D-NJ, Ways & Means Committee chair Richard Neal, D-MA and Education and Labor Committee chair Bobby Scott, D-VA. “We look forward to working with the Biden Administration to pass this critical legislation to lower the soaring cost of prescription drugs for the people.”

The release noted that a Kaiser Family Foundation Health Tracking poll published in March 2019 “found that one in four Americans who take prescriptions medications find them to be unaffordable and nearly one in three adults report not taking their medicines as prescribed because of the cost.”

But a statement opposing HR 3 from the Pharmaceutical Research and Manufacturers of America noted the same poll found respondents were much less in favor of government price negotiation as a solution to high drug prices if it led to reduced innovation or access.

A large majority (86%) initially supported government price negotiation, the poll found. However, “the share in favor drops sharply when supporters hear opponents’ potential arguments that it could lead to less research and development of new drugs (31% still favor while 66% oppose) or that Medicare might not cover some prescription drugs (29% still favor while 67% oppose),” the pollsters reported.

The industry is banking on the expectation that the innovation argument will find solid traction with the public in light of the industry’s stunning achievements with COVID-19 vaccines. (Also see "PhRMA’s ‘Better Way:’ Remember COVID Success, Tweak Part B, And Bash HR 3" - Pink Sheet, 13 Apr, 2021.)

Centrist Democrats May Also Appreciate Innovation Argument

That innovation concern is shared by centrist members of the Democratic party in the Senate and as a result, the more extreme policies in HR 3 will be revised or eliminated in any drug pricing legislation that advances, Avalere founder Dan Mendelson predicted in an interview with the Pink Sheet. Mendelson will be joining JP Morgan Chase later this month to head a new team on healthcare innovation.

“The introduction of HR 3 is opening the conversation and setting the stage for what could be more centrist policy that would be passed in the context of an infrastructure bill,” he said.

He also anticipates that drug pricing legislation would be included in the infrastructure package being developed by the White House as a “pay for” to cover the cost of health care expansion provisions. That has been stakeholders' expectation and House Speaker Nancy Pelosi, D-CA, says that including HR 3 in the package is a “top priority” for Democrats.

But the White House has not announced plans for including drug pricing and health care provisions in the infrastructure package, which has prompted confusion among stakeholders. (Also see "Will Pharma End Up Paying For The Infrastructure Bill?" - Pink Sheet, 25 Mar, 2021.)

Nevertheless, Mendelson believes that is still the game plan. The White House may be waiting to tip its hand on drug pricing so that industry has less time to mount an opposition, he suggested.

The Congressional Budget Office projected HR 3 could save the federal government about $456bn over 10 years and lead to $42bn in savings to Medicare due to better health outcomes for patients with increased access to drugs at lower prices. CBO also estimated the bill would lead to development of fewer drugs over the next decade. (Also see "The Absurd Innovation Debate: Dueling Views Of HR 3 Miss The Point" - Pink Sheet, 6 Dec, 2019.)

Biggests Cost Saver In HR 3 May Not Make It Into Final Bill

The drug pricing provisions of HR 3 as re-introduced are unchanged from the version that passed the House in late 2019. They would:

1. Redesign the Medicare Part D benefit to cap annual out-of-pocket costs for beneficiaries at $2,000 and pay for it in part by establishing a new mandatory discount on drugs provided to beneficiaries in the catastrophic phase of the benefit;

2. Require manufacturer rebates in Medicare and the employer-sponsored insurance market when drug prices increase faster than inflation; and

3. Enable the Health and Human Services Department to ‘negotiate’ prices for a selection of costly drugs using prices paid in certain foreign countries as a reference

But Mendelson predicts the bill’s biggest saver – price negotiation – will not advance. “The governmental pricing authority is unlikely to pass the Senate because the Democratic party is diverse and a lot of members are very nervous about that policy, given that it will inhibit innovation going forward,” he said.

The process of molding the bill begins soon. The House Energy & Commerce Committee announced it will hold a legislative hearing on HR 3 on 4 May.