- Medicare would negotiate the prices of at least 25 and up to 250 drugs with no direct competition and set a maximum price based on what's paid in other countries under a plan pitched by House Speaker Nancy Pelosi, D-Calif., to restrain drug spending.
- The legislation released Thursday faces a hearing next week, where moderate Democrats and Republicans may seek to tone down the price negotiation proposal and progressives may seek to widen it.
- If Pelosi's proposal passes, House leaders will need to haggle with their Senate counterparts to resolve differences over that body's version of the bill, which does not contain the direct price negotiation proposal.
Drug prices are a rare area where Republicans and Democrats agree, at least in theory, that action is needed to drive them down. Pelosi's plan to directly negotiate Medicare drug reimbursement is the most ambitious, and probably least likely to become law, of any that has emerged so far.
When the Medicare Modernization Act that created an outpatient drug benefit passed in 2003, the U.S. government was explicitly barred from direct negotiation of prices with drug manufacturers. That role was left to the private plans into which beneficiaries enroll to receive prescriptions.
Left-leaning policymakers have kept the idea alive since then as a way to restrain drug price increases, and even President Donald Trump briefly endorsed the idea between his 2016 election and 2017 inauguration, but he has since backed away from the idea. Pelosi's proposal is the closest the concept has been to becoming law, but still remains a long shot.
As it stands, the Pelosi proposal, as reported by The Hill and others, would allow for price negotiation of up to 125 pharmacy-dispensed drugs covered by Medicare Part D and 125 physician-administered drugs under Part B that have no direct competition.
Unlike a draft revealed last week, the formal Pelosi proposal recognizes "the practical capacity and bandwidth constraints" of HHS and calls for annual negotiation of a "bare minimum" of 25. The top 25 drugs that would be eligible for negotiation account for 23% of Part D drug spending, and the top 25 in Part B account for 66% of drug spending.
Under the Pelosi proposal, a maximum price for each drug would be set at 1.2 times an average of what is paid in Australia, Canada, France, Germany, Japan and the United Kingdom. Companies refusing to negotiate would be taxed at 65% of the drug's gross sales, escalating quarterly to 95%.
A bill that the Senate Finance Committee voted to send to the full chamber in July didn't contain direct Medicare price negotiation, as Pelosi's draft does. Moreover, such a concept would be unlikely to win support in the Republican-held Senate.
Republican members of the House Energy and Commerce Committee, a subcommittee of which will debate the bill next week, were quick to criticize the legislation. "Now Speaker Pelosi is back at it — pushing a socialist proposal to appease her most extreme members. It does not have to be this way; there are bipartisan solutions to bring down prices for patients and create real transparency and accountability for this system," the Republicans wrote.
PhRMA President Stephen Ubl was equally critical. "We do not need to blow up the current system to make medicines more affordable," he said in a statement.
The Pelosi plan did include some areas of agreement with the Senate plan, including mandated rebates on drugs with prices increasing faster than inflation and limiting Medicare beneficiaries' cost-sharing once they have paid out an annual deductible.
With agreement in both chambers, those provisions would likely be included in a compromise bill that both houses of Congress would need to approve before sending to the White House.
Pelosi's proposal to tie Medicare drug reimbursement to prices paid overseas bears some similarities to a concept backed by Trump.
The Trump proposal, part of a proposed regulation published last year, is limited to physician-administered drugs reimbursed under Medicare Part B, using a competitive bidding mechanism. By contrast, Pelosi's plan would set a maximum price of 1.2 times an international price index for any drug subject to direct Medicare price negotiation.
Rachel Sachs, a Washington University associate law professor who specializes in biotechnology issues, said a compromise that does not include drug price negotiation will not meaningfully affect drug price increases, even if both agree on inflation rebates.
"The Senate plan helps seniors with out of pocket costs but wouldn't really make the fundamental changes to our drug payment system that [Pelosi's] does," she said.