Medicare Price Negotiation Targeting Only Post-Exclusivity Drugs Proposed By Moderate House Democrats
Executive Summary
Legislation authorizing the US government to directly negotiate drug prices with manufacturers failed to pass in one key House committee as a trio of Democrats joined Republicans to vote against advancing the policy.
Moderate Democrats are working against broad US government drug price negotiation legislation in the US House and some are urging instead a more narrow approach that would apply only to drugs with expired market exclusivity that are covered by Medicare Part B.
Reps. Scott Peters, D-CA, Kurt Schrader, D-OR, and Kathleen Rice, D-NY, voted against drug pricing legislation modeled on House Speaker Nancy Pelosi’s HR 3 during a House Energy & Commerce Committee markup of the “Build Back Better” legislation on 15 September. As a result, the drug pricing provision failed to advance.
The outcome is a setback for the legislation, which is strongly opposed by biopharma. However, the House Ways & Means Committee cleared the drug pricing provisions as it wrapped up its markup of the Build Back Better bill the same afternoon so they still may advance to the House floor. Nevertheless, moderates seem likely to object to the provisions again if the bill gets to that stage.
The drug pricing provisions cleared by Ways and Means would authorize the Health and Human Services Department to “negotiate” prices on high-cost treatments covered by Medicare Parts D and B and impose heavy penalties on manufacturers who declined to comply with the process. The legislation also would have made the HHS negotiated prices available to the commercial market. (Also see "House Price 'Negotiation' Plan: It Is Even Worse Than It Sounds" - Pink Sheet, 24 Sep, 2019.)
The Pharmaceutical Research and Manufacturers of America issued a statement on the committee votes applauding the actions by moderate Democrats. “The House markups on health care demonstrate there are real concerns with Speaker Pelosi’s extreme drug pricing plan and those concerns are shared by thoughtful lawmakers on both sides of the aisle,” executive VP for public affairs Debra DeShong said.
“These concerns have been known for months yet they’ve been ignored by House leaders. This should be a strong signal to the House leadership that there is broad support for lowering costs for patients without sacrificing access to new cures and treatments,” she added.
New Legislation Would Significantly Narrow Focus Of Price Negotiation
Reps. Peters and Schrader offered an alternative bill earlier this month that would have significantly narrowed the price negotiation provision to focus only on allowing Medicare to negotiate prices for drugs covered by Part B (physician administered) that no longer have market exclusivity. The legislation estimates the government could negotiate savings of between 25% to 35% for such drugs.
The legislation would also impose penalties on drugs covered by Medicare D and B whose prices increase faster than inflation, retroactive to 2016. It would cap seniors’ out-of-pocket spending in Medicare Part D, require rebate transparency from pharmacy benefit managers and target industry tactics aimed at delaying generic drug competition.
The legislation has been welcomed as an encouraging development by Incubate, an advocacy group representing venture capital organizations involved in biotech funding. “We applaud Reps. Peters and Schrader for advancing a thoughtful alternative to HR 3,” executive director John Stanford said. “It demonstrates that members of Congress are hearing our message – and understand that investment in early-stage life sciences research will plummet if the United States embraces price controls.”
Venture capital firms, small biotech companies and patient groups expressed similar concerns in a recent letter to the Democratic leadership of the House and Senate. “Congress is considering allowing the government to dictate the price that a company may charge for a novel drug with the threat of ruining the company financially with a 95% tax should the company refuse to accept the government’s price,” said the letter.
“Such draconian measures would immediately halt private funding of drug discovery and development,” it argues. “As an industry we would no longer be able to infer what insurance plans might value and pay tomorrow from what they value and pay today, which is the premise of a market economy. Unpredictable government-dictated prices would supplant the current market-based framework that inspires biomedical R&D investment.”
The letter was co-authored by RA Capital managing partner Peter Kolchinsky, Synlogic Therapeutics president and CEO Aoife Brennan, Braidwell Management chief investment officer Alex Kamal, Ovid Therapeutics CEO Jeremy Levin, Silverback Therapeutics CEO Laura Shawver and PreTech Health CEO Daphne Zohar. Hundreds of other organizations also signed on.