House Passes Drug Legislation – Senate Tweaks Proposals

December 17, 2019

On Dec. 12, 2019, the U.S. House of Representatives passed HR 3, the Elijah Cummings Lower Drug Costs Now Act, which would allow the government to negotiate drug prices, among other reforms. Prior to HR 3 being considered on the floor, the Republican Caucus introduced its own drug-pricing bill largely composed of smaller bipartisan elements, some similar to the Senate Finance Committee plan. In addition, Senate Finance Committee Chairman Chuck Grassley (R-Iowa) released an updated version of his plan.

HR 3

HR 3 restructures Medicare Part D. Currently, Part D places no cap on patients’ cost-sharing. HR 3 recognizes that more than a million Medicare beneficiaries have substantial out-of-pocket costs and addresses this by capping beneficiaries’ out-of-pocket costs at $2,000 annually.

The bill also aims to control and potentially reverse price increases for drugs in Medicare Part B and D. The package would require manufacturers of all drugs sold to either program that have raised the relevant prices of their drugs faster than inflation since 2016, to either lower the price of the drug or pay the above-inflation amount back to the Department of the Treasury as a rebate. An amendment added to the legislation to appease the progressive element of the Democratic Caucus seeks to extend these protections to drugs covered under employer health plans.

Last, HR 3 permits the secretary of health and human services to negotiate drug prices for both the Medicare and private markets. The bill permits the secretary to negotiate prices on a minimum of 50 and up to 250 branded drugs incurring the greatest cost to the healthcare system. The legislation also creates an international price index to be used as a target price ceiling.

The Congressional Budget Office (CBO) estimated that the negotiation portion of the legislation alone would lower government healthcare spending by $456 billion over a decade, with the inflationary rebate provision saving another $36 billion. Nearly all of this savings would be reinvested in Medicare in the form of expanded benefits, including vision, dental and hearing coverage. It also would enhance Part D’s low-income subsidies and invest in National Institutes of Health and its drug research.

House Republicans’ Proposal

On Dec. 9, the Republican Caucus in the House of Representatives unveiled its own drug-pricing package, HR 19, the Lower Costs, More Cures Act. In the release, the Republicans touted the bipartisan nature of the package — it consists primarily of provisions already adopted on a bipartisan basis by various committees in the House and Senate.

Similar to HR 3, HR 19 contains provisions restructuring the Medicare Part D benefit. HR 19’s restructuring, though, looks more like the Senate Finance Committee’s changes to Part D, capping out-of-pocket costs at $3,100 and changing manufacturer and Medicare responsibilities throughout the plan design. It does not constrain pharmaceutical companies from increasing the prices of their drugs over time, nor does it address high launch prices.

HR 19 contains a range of other changes including:

  • transparency provisions, one of which requires manufacturers to provide notification of an explanation for list price hikes greater than 10 percent in a single year or 25 percent within three years; and
  • combating drug company efforts to delay generic or biosimilar entry, including pay-for-delay reform, reforms to first generic exclusivity “parking” tactics, and Orange and Purple Book reforms.

Senate Finance Package Updates Released

On Dec. 6, the Senate Finance Committee released a revised version of its drug-pricing package. The package contains newly introduced provisions and edits many of its key elements. However, the two core provisions remain — redesigns to the Medicare Part D benefit structure to provide Medicare beneficiaries protections for high out-of-pocket costs. Costs would be limited to $3,100 out of pocket. However, the details of manufacturer and plan cost-sharing through the benefit have changed since the package was first released.

Next, the package controls price increases for drugs in Medicare Part B and Part D by requiring additional rebates to Medicare if drug companies increase their prices faster than inflation. The inflationary rebate provisions do not go as far as those in HR 3, but the CBO estimated that they would produce savings for Medicare beneficiaries and the government.

The revised version makes some changes to its core provisions, updating the details of the cost-sharing obligations throughout the Part D redesign, and permitting some beneficiaries to spread out the costs of their medications throughout the year, similar to a provision in HR 19.

Conclusion

It is clear that HR 3 is headed for the Senate graveyard. There has been no interest among the Senate Republican leadership in considering HR 3. It is unclear if the Republican leadership supports the Senate Finance Committee package or if the leadership will provide time for consideration.

Passage of the far-reaching House proposal may increase pressure on the Senate to act before the end of the session in 2020. The White House is expected to announce a drug importation proposal in the near future, which may further add pressure for congressional action.

The House and Senate proposals share a common theme of limiting beneficiaries’ financial exposure in Medicare Part D. To address cost savings, HR 3 and the Senate Finance Committee plan include required rebates when drug companies raise their prices faster than inflation. HR 3 alone calls for drug price negotiations. The White House opposes HR 3’s drug negotiation proposal.

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