Democrats plan crackdown on rising drug costs

Democrats are hoping 2021 will be the year they accomplish their long-held goal of reining in rising prescription drug costs by allowing the government to negotiate directly with pharmaceutical companies.

The proposal is largely opposed by Republicans and loathed by the pharmaceutical industry, but Democrats think they have a chance of getting it done with control of the White House and Congress.  

Price negotiations could be included later this year in a reconciliation bill, a fast-track budgetary move that only needs 51 votes to pass the Senate and can’t be filibustered.

The party is already using reconciliation to move President Biden’s COVID-19 relief measure through Congress while sidestepping a GOP filibuster.

The new effort could be part of a second package later this year. 

“I think, first of all, we should get as much done through reconciliation as we can,” said Sen. Tim Kaine (D-Va.), who introduced a bill with Sen. Michael Bennet (D-Colo.) this week that would establish a public option health insurance plan and allow Medicare to negotiate lower drug prices. 

“We’ll do our very, very best to get as much of it as we can, with the Biden team, in bill two,” Kaine said, referring to the second reconciliation bill that Democrats hope to pass later this year.

Public anger over the rising costs of insulin and other life-saving drugs has grown in recent years, but Congress has not been able to accomplish significant legislative reform to the convoluted drug pricing system. 

While a bipartisan proposal from Sens. Chuck Grassley (R-Iowa) and Ron Wyden (D-Ore.) gained support in the Senate last year, Sen. Mitch McConnell (R-Ky.), who at that point was majority leader, refused to bring the bill to the floor in an election year. 

Now with full control of the government are hoping to go much bigger than the Grassley-Wyden bill, which would limit out-of-pocket costs for seniors and cap price increases to the rate of inflation, but not allow government price negotiation. 

“It just defies common sense to not let the government do that,” Wyden recently told reporters.

The proposal would upend the pharmaceutical industry, which has spent billions of dollars over the past several years on lobbying and campaign contributions.

“Do I think this will be easy? No. Pharma will fight anything that curbs its unilateral power to set prices on brand name drugs,” said David Mitchell, co-founder of Patients for Affordable Drugs. “But I think we are looking at the best environment we have seen in many, many years for the enactment of meaningful reform to lower drug prices.” 

Democrats are likely to return to some version of H.R. 3, a bill that passed the House last year with the support of every single member of the caucus but received few votes from Republicans. It did not receive consideration from any Senate committee or a vote on the Senate floor. 

The main component of that bill has been pushed by Democrats for decades. It would allow the government to negotiate with pharmaceutical companies for lower prices on drugs covered by Medicare, the federal health program for seniors. Drug companies would have to then extend those prices to private insurers.

It would completely change the way the U.S. pays for drugs, saving the federal government more than $456 billion over 10 years, according to an analysis by the nonpartisan Congressional Budget Office (CBO).

It would also lead to 40 fewer new drugs coming to the market in the U.S. over the next two decades, according to the CBO estimate.

Democrats arguing for the change point to rising costs of brand-name drugs and insurance plans that increasingly require patients pay more money toward their own care, forcing them to ration insulin and other drugs. They also note that H.R. 3 includes $10 billion for biomedical research. 

Reconciliation is a tricky process that Democrats used in 2010 to pass changes to the Affordable Care Act and Republicans used to pass their tax-cut bill in 2017. The legislation must meet strict rules or risk being thrown out by the nonpartisan Senate parliamentarian, though Kaine said he thinks his bill can pass muster.

Democrats must also contend with differences within the caucus. While Democrats broadly agree on allowing Medicare to negotiate for lower drug prices, negotiations over the scope of H.R. 3 took about a year, with moderate and progressive members butting heads.

The bill that eventually passed authorized the government to negotiate the prices of between 50 and 250 drugs per year. Progressives questioned why there should be a maximum number of negotiated drugs at all and signaled they will carry that fight into this year.

“In this moment of a pandemic, it is more important than ever that we have the strongest possible drug pricing bill passed by the House, the Senate and the White House, and we are definitely going to use HR 3 as a baseline,” said Rep. Pramila Jayapal (D-Wash.), chairwoman of the Congressional Progressive Caucus.

A list of policy recommendations agreed to by Biden and Sen. Bernie Sanders’s (I-Vt.) “unity task force,” which Jayapal served on, did not include a maximum of how many drugs could be negotiated. The task force also recommended that generic drugs be included in negotiations. H.R. 3 only applied to drugs that have no generic competition, since those tend to be the most expensive. 

Democratic leadership argued at the time the federal government doesn’t have the capacity to negotiate prices for an unlimited number of drugs, and it wouldn’t be a good use of time or money to negotiate prices that are already low or reasonable compared to other countries. 

Another obstacle is fierce opposition from the drug companies, which argues other sectors of the health care industry are not being held accountable for their role in rising costs.

A report issued by the Senate Finance Committee last month faulted a “broken” drug pricing system that incentivizes drug companies to raise list prices to ensure their products are covered by insurance companies. 

The report places a lot of blame on pharmacy benefit managers (PBMs), middlemen that negotiate with drug companies on the behalf of insurance plans, large employers and other payers for discounts, also referred to rebates, on a drug’s list price. PBMs charge fees and are paid a percentage of the rebate.

This arrangement also translated into higher sales volumes and revenue for drugmakers, according to the report. 

Drug companies have pushed for rebate reform that would require that those savings be passed down to patients. Insurers argue they already do this by lowering premiums.

Drug companies also support capping out-of-pocket costs for seniors. Language doing so is in H.R. 3 and other drug pricing bills. 

Still, some Medicare patients must pay a percentage of a drug’s list price at the pharmacy counter, so they are affected when prices go up. 

Regardless of lobbying by the drug industry, Democrats appear intent on following through on their years-long promise to allow Medicaid to negotiate drug prices. 

Even Sen. Joe Manchin (D-W.V.), one of the most moderate members of the Senate, whom Democrats know they must win over to pass their priorities, has backed drug pricing negotiation legislation in the past. 

Negotiation has been part of the Democratic playbook for almost 20 years, said one Democratic aide. 

“I wouldn’t expect all of a sudden the caucus as a whole to say, let’s go do something else.”