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Finance drug price bill faces GOP resistance before markup

Proposals target Medicare drug prices

Senate Finance Chairman Charles E. Grassley, R-Iowa, on Tuesday offered a details on a drug price bill. (Bill Clark/CQ Roll Call file photo)
Senate Finance Chairman Charles E. Grassley, R-Iowa, on Tuesday offered a details on a drug price bill. (Bill Clark/CQ Roll Call file photo)

The Senate Finance Committee on Tuesday outlined a long-anticipated drug price bill, but a planned Thursday markup may not go smoothly because of Republican discontent with the measure.

The bill is meant to slow the growth of Medicare’s prescription drug spending, limit cost-sharing for Medicare beneficiaries, and make it easier for state Medicaid programs to pay for expensive treatments, according to a summary.

While some committee Republicans on Monday said positive things about the bill’s estimated savings to the government and Medicare beneficiaries, other GOP panel members after the bill’s release Tuesday amplified their concerns over provisions they say resemble price controls.

At issue is a provision that would impose penalties on drugmakers if they raise the prices of their drugs faster than the rate of inflation.

“Basically we’re talking about price controls,” said Sen. Pat Roberts, a Kansas Republican. “And once you open that door, other things will happen.”

The bill would introduce that cost control measure for both Medicare Part B — which covers outpatient care including drugs administered by doctors — and Medicare’s prescription drug benefit, Part D. Applying the inflation limits to Part D is generating the most controversy.

“That kind of moves us away from what Part D was all about in the first place, which was to introduce free market forces and competition into a program and drive prices down that way, and I think it’s successfully done that,” said John Thune of South Dakota, the Senate’s No. 2 Republican.

Asked if the caps were a problem, North Carolina Republican Sen. Richard M. Burr replied, “It is if you’re one that believes in innovation.”

Other Republican panel members — Michael D. Crapo of Idaho, Rob Portman of Ohio, Tim Scott of South Carolina and Patrick J. Toomey of Pennsylvania — voiced similar concerns. Toomey and Roberts both said they may introduce amendments seeking changes.

But Texas Republican Sen. John Cornyn said the bill was “moving in the right direction.”

Louisiana Republican Sen. Bill Cassidy offered a more full-throated endorsement. “This is not price controls. It merely says that if you increase your prices as you like, you will pay a penalty,” he said. “But you can still increase your price.”

Cassidy also rejected the idea that the bill would harm pharmaceutical innovation. He said most drug companies profit “off of increasing prices on existing drugs, as opposed to having to innovate in order to come up with a new product,” and that the bill would encourage the latter.

White House spokesman Judd P. Deere tweeted that the administration “is encouraged by the bipartisan work” and is “engaging with coalitions to help build support.”

The dynamic among the GOP raises the possibility that the bill could advance out of committee with more Democrats than Republicans. But Democrats want at least one high-profile change. Sen. Debbie Stabenow of Michigan said she would offer an amendment to allow the government to directly negotiate drug prices in Medicare. Other panel Democrats suggested that change might be needed to win their support.

“It needs direct negotiation with the drug companies. It works. It works in Canada. It works in the [Department of Veterans Affairs]. That’s what we should be doing,” said Democratic Ohio Sen. Sherrod Brown.

Yet changes in either direction might threaten the compromise that took months of negotiation between Finance Chairman Charles E. Grassley, of Iowa, and ranking member Oregon Democrat Ron Wyden. A lack of support from too many members, particularly Republicans, could reduce the desire of Majority Leader Mitch McConnell of Kentucky to devote Senate floor time to the bill.

The Finance effort is seen as a key component in Congress’ efforts to pass meaningful drug price legislation in a bipartisan way, but the divisions and the drug industry’s opposition could make the work more difficult.

The drug industry’s trade group, the Pharmaceutical Research and Manufacturers of America, and the U.S. Chamber of Commerce sharply criticized the bill.

“The legislation would siphon more than $150 billion from researching and developing new medicines while giving those savings to the government” and insurers who operate Medicare plans, PhRMA President and CEO Stephen J. Ubl said in a statement.

“This legislation shows that no industry is above accountability,” Grassley and Wyden said in a statement. “Passing these reforms, especially those that will affect some of the most entrenched interests in Washington, is never easy. But Americans are demanding action and reform is long overdue.”

Major changes

According to the Finance Committee, the Congressional Budget Office estimates that the bill would save $85 billion in Medicare and $15 billion in Medicaid over a decade. It would reduce premiums for beneficiaries of Medicare’s Part D benefit by $5 billion and limit their out-of-pocket drug spending by $27 billion over the decade.

The savings come in part from the controversial policy that would limit drug price increases in either Medicare program.

The bill would set a baseline price for drugs based on July 2019, and each year the administration would calculate what a drug price should be based on a consumer-price index inflation rate. In Part B, if the average sales price of the drug exceeds the target, the drugmaker would rebate the government the difference between the price based on inflation and the actual price. For Part D, the same would apply if the drug’s list price exceeds the inflationary rate.

The proposed inflation cap for Part D is particularly controversial for Republicans because it would hinge on the drugmakers’ price in the private market. According to the committee’s characterization of the CBO estimate, that change would also result in savings for the commercial insurance market, which would be a clear hit to drug companies’ bottom lines.

About $50 billion in savings over a decade would come from restructuring Part D’s design. The change would limit spending by taxpayers and consumers while increasing the costs borne by insurers and drug companies.

While currently Medicare pays 80 percent of the costs when a patient’s drug spending exceeds a “catastrophic” threshold, the bill would reduce the government’s share to 20 percent by 2024.

Consumers, starting in 2022, would have an out-of-pocket spending limit for the first time and wouldn’t have to pay any costs above $3,100 in annual spending. For costs over that amount, the portion not paid by Medicare would be covered by the private insurers that administer Part D plans and drug manufacturers, who will pay 60 percent of costs and 20 percent, respectively. That would be a significant new financial burden for both industries, but lawmakers say it will discourage the use of high-cost drugs and price increases by drugmakers.

The changes would cut seniors’ costs. Under the bill, seniors would still pay the full costs up to their deductibles of $415, and then pay 25 percent of their drug costs up to $3,100. Under current law, they pay 5 percent of all costs after the $5,100 catastrophic threshold. The proposed cap could sharply reduce costs for the sickest patients.

For Medicaid, the bill would give states a new way to pay for high-cost treatments like gene therapies, which can have six-or-seven figure price tags and sometimes strain state budgets.

The legislation would let states negotiate with drugmakers for long-term payment arrangements for therapies with the potential to cure a patient of a disease or significantly reduce their symptoms. The states would be able to pay for the treatments in installment payments, and could stop paying if it appeared that the treatment wasn’t working. Drugmakers are now typically required to offer their lowest prices to Medicaid programs, but the new agreements wouldn’t affect the so-called “best price” mandate.

Administration’s goal

The bill, coupled with other committees’ measures, is likely the Trump administration’s best opportunity to fulfill its promises to lower drug prices. While the president’s backing could risk it losing support from some Democrats, a White House endorsement might win over Republicans.

If the bill wins committee approval, it will likely be packaged for the Senate floor with measures from the Health, Education, Labor and Pensions Committee and the Judiciary Committee.

While some senators sought a vote on the measures before the August recess, the timing for floor debate is unclear. Senate health committee Chairman Lamar Alexander, of Tennessee, said Tuesday that given the timing of the budget vote, there might not be time next week. Alexander hoped the measure could come up in early September.

Lauren Clason and Mary Ellen McIntire contributed reporting.

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