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Biden walks political tightrope in drug pricing dispute

White House, Democrats disagree on including Medicare drug negotiations in upcoming legislative push on family aid

Congress will likely try to move forward with drug pricing legislation although President Joe Biden excluded such changes from his latest economic policy proposal.

Biden called on Congress in his joint address Wednesday night to enact health care legislation this year that would expand Medicare and allow the massive program to negotiate drug prices. But the White House and Democrats on Capitol Hill disagree on whether to include it in the upcoming legislative push on family aid, which could be one of the last major bills to move this year besides spending legislation.

[White House readies $1.8 trillion family aid plan, tax increases]

Democrats, who ran on health care during the last few campaign cycles, pushed Biden last week to back Medicare drug negotiations in the second part of his infrastructure plan.

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Both Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Charles E. Schumer, D-N.Y., said drug pricing would be a priority in the upcoming package, but Pelosi was noncommittal in a Thursday press conference, saying the caucus was “united” around Biden’s plan.

“What is in one bill or another is not really what is important,” Pelosi said. “What is the path that we are on to accomplish what we need to accomplish to do what we said for the people?”

Work on plans to lower drug prices is already beginning. The House Energy and Commerce Committee is set to hold a subcommittee hearing on drug costs next week, after Pelosi and other House leaders reintroduced their signature bill to let Medicare negotiate drug prices.

“It is unacceptable that Americans pay three or four times more than people in other countries do for the exact same prescription drugs,” Energy and Commerce Chair Frank Pallone Jr., D-N.J., said Wednesday in a statement. “It’s critical that we level the playing field by giving the federal government the ability to negotiate lower prescription drug costs, and this will be one of my top priorities as we work to pass the American Families Plan.”

Senate Finance Chairman Ron Wyden, D-Ore., said lawmakers will look at “every possible vehicle” as a way to move drug pricing legislation.

“My sense is what the president has decided to do is give the Congress the space to find an agreement, and that job begins now,” Wyden told reporters. 

House Republicans have their own drug pricing measure. Most oppose permitting the government, rather than private Medicare insurers as the current system allows, to negotiate prices.

While Democrats say they want to move forward on health care legislation, it could take time to unite around a certain policy. Biden proposed making permanent enhancements to premium subsidies that help people afford health insurance purchased on the exchanges set up by the 2010 health care law, but many Democrats also want to expand Medicare benefits and eligibility. 

“We need to bring everybody together on a package,” Sen. Debbie Stabenow, D-Mich., said earlier this week. “Obviously, we care deeply about health care and we need to figure out how we’re going to put all that together, so it’ll take a little bit of time.”

Alex Lawson, executive director of the advocacy group Social Security Works, said the White House is prioritizing Biden’s priorities, such as tax changes, in the upcoming package, while Hill Democrats are looking to follow through on health care campaign promises.

“That’s not what the Hill ran on for six years, so that’s where there’s a little bit of daylight between them,” he said.

Industry’s clout

Lowering drug costs would mean confronting some of Washington’s strongest lobbying groups, including the pharmaceutical industry. The health care sector is enjoying a boost in public opinion following the historic COVID-19 pandemic response. About 51 percent of the public viewed the industry positively in 2020 compared with just 38 percent in 2019, according to Gallup.

The drug industry’s successful race to develop vaccines is softening public pressure over its pricing practices, although drug prices remain the highest-polling health care issue with significant support in both parties, Harvard University health policy and political analysis professor Robert Blendon said, even if lawmakers don’t agree on solutions. The industry is also facing a battle over Biden’s tax plan, which targets offshore profits from multinational companies.

“Vaccine development has not immunized the industry from anger,” Blendon said.

Rep. Peter Welch, D-Vt., said Democrats shouldn’t underestimate how difficult taking on the pharmaceutical industry is. He argues lawmakers should focus on passing legislation to allow Medicare to negotiate drug prices and then decide how to use the savings, but acknowledged some Democrats will face fierce industry lobbying to buck party leaders on drug pricing. 

“We’ve got to take seriously how hard this is,” Welch said. “Because pharma will continue to be everywhere. They’ll sneak in under the door, or over the transom, however they can get there to maintain that pricing power that they have.”

Democrats are calculating how action on drug costs would affect their reelection chances in 2022. While progressives want to deliver on their loftier campaign promises, moderates could face blowback from constituents who are more averse to any expansion of government. 

On Monday, Congressional Progressive Caucus Chair Pramila Jayapal, D-Wash., sought to dispel appearances of an ideological divide by getting swing-state moderates like Rep. Conor Lamb, D-Pa., to sign a letter urging Biden to expand Medicare.

“Improving Medicare is not only good and critically-needed policy, it also has support from overwhelming bipartisan majorities of the American people,” they wrote.

Splitting the risk

Some see Biden’s decision to split the infrastructure proposal as an indicator of the tricky political logistics. The president can only afford to lose one or two Senate votes if Democrats use budget procedures to sidestep a Republican filibuster, a daunting task in an evenly divided Senate. 

“The president is committed to getting the ACA covering most people during the early part of his term, but his biggest fear is that he will not have the votes for infrastructure,” said Blendon, using the health care law’s acronym.

The two parties rarely agree on health care issues. The two-part proposal could shield the first piece of Biden’s plan — which contains more traditional, bipartisan physical infrastructure and tax proposals — from the higher political risks associated with Wednesday’s families plan, Blendon said. 

But Congress could also pass a single proposal to make the most of the limited flexibility under budget procedures. 

Others see the second proposal as simply a messaging document. Spencer Perlman, a Veda Partners investment firm managing director, pointed to midterm losses the Clinton and Obama administrations suffered over health care as evidence that Biden is trying to protect the popularity of the first infrastructure package.

“Anything that threatens that dynamic is being coolly stripped away by the White House,” he wrote in a note to investors.

In lieu of drug pricing proposals, Biden’s plan includes $200 billion to make permanent expiring tax credits for insurance premiums on the exchanges. The Committee for a Responsible Federal Budget estimates a 10-year continuation would cost $250 billion over 10 years. 

Polling shows that building on the 2010 health care law is the most popular coverage expansion option among Democratic voters.

Optical war

Ultimately, the brouhaha over what is and is not officially in Biden’s proposal is unlikely to affect what provisions Congress acts on. Any measures would likely need to be more moderate in order to pass the Senate as Democrats brace for the midterm elections, when the ruling party historically loses seats.

By sidestepping the drug pricing issue, Biden may be trying to avoid endorsing one faction over another while giving himself the flexibility to sign anything Congress clears.

Industry observers predict any successful legislation would mirror more bipartisan proposals like the Senate Finance Committee’s previous bill to place an inflationary cap on Medicare drug prices and restructure how the Part D program pays for drugs, which would provide Democrats around $85 billion in savings over 10 years.

Congress could also try to repeal a Trump-era rule to eliminate back-door manufacturer rebates to insurance plans, which might save around $200 billion on paper even though the rule never took effect.

But more sweeping proposals like allowing Medicare to negotiate drug prices, which would save around $450 billion over 10 years, will be hard to pass. Republicans largely oppose giving the government this power, and at least one Democrat — Sen. Bob Menendez of New Jersey — is a skeptic.

“If you want to go after the pharmaceutical industry as a revenue-raiser for other things, I’m not interested,” Menendez said. “If you want to talk about how you actually help the consumer, the end-user, get lower prescription drugs, I’m all ears.”

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