Although House Speaker Nancy Pelosi (D-Calif.) has yet to release the actual text of her Lower Drug Prices Now Act, the Democrat plan, unveiled in summary form Thursday, is being fast-tracked through the House with a hearing scheduled Wednesday before the Energy and Commerce Committee.
Like the draft that was leaked earlier this month, Pelosi's official summary of the bill calls for direct Medicare price negotiations on up to 250 of the costliest Part B and D drugs with no competition. An international price index would be used to set the upper level starting point, and the negotiated price would be available to other government programs, as well as the private market. (See BioWorld, Sept. 11, 2019.)
The new summary deviates from the leaked version when it comes to the stick it uses to get drug companies to negotiate. Whereas the earlier version proposed a noncompliance fee equal to 75% of the gross sales of the drug the previous year, the new summary calls for an escalating excise tax on those gross sales – starting at 65% and increasing by 10% every quarter the manufacturer is out of compliance, to a maximum of 95%.
The official summary maintains the new inflation rebate proposed in the draft, subjecting all Part B and D drugs to the rebate, with 2016 as the base year. It also fleshes out the redesign of Part D, specifying that beneficiary annual out-of-pocket costs would be capped at $2,000. In the catastrophic phase, government reinsurance would be cut to 20%, with payers covering 50% of the cost and drug companies responsible for the remaining 30%. Currently, government reinsurance covers 80% of catastrophic costs.
Abandoning the free market
The biopharma industry lambasted the plan Thursday. "It abandons any pretense of allowing a free and fair market system to determine the value of prescription medicines," said Jim Greenwood, president and CEO of the Biotechnology Innovation Organization.
Under H.R. 3, "House Democratic leaders would surrender to foreign bureaucracies the power to dictate the value of medicines and the treatments available to America's patients," Greenwood said. "If this proposal were to become law, it will upend our country's ability to lead the world in biomedical innovation."
Stephen Ubl, president and CEO of the Pharmaceutical Research and Manufacturers of America, voiced similar concerns about what he called "Pelosi's radical plan." Ubl claimed the bill "would give the federal government unprecedented, sweeping authority to set medicine prices in public and private markets while importing price controls from other countries that restrict access to innovative medicines." It also would upset the successful Part D program without any guarantee that the savings would be used to lower costs at the pharmacy counter, he said.
Meanwhile, Republicans in the House are pushing back against what they see as the politicization of what has been a bipartisan issue, noting that dealing with disease is not bound by party lines. Rep. Greg Walden (R-Ore.), ranking member of the House Energy and Commerce Committee, used his opening remarks at a subcommittee hearing Thursday on drug companies gaming the system to blast House Democratic leaders for the political games they're playing with an opportunity to meaningfully address drug prices.
He took them to task for excluding Republicans from the drafting of H.R. 3, which he said would completely rewrite how Americans innovate and pay for drugs. Citing the Energy and Commerce Committee's past bipartisan successes, including the 21st Century Cures Act and the FDA Reauthorization Act, Wyden scolded Pelosi for removing the bill from the committee process that allows thoughtful bipartisan discussion in developing legislation. Instead, he said, the bill was drafted in secret behind Pelosi's closed doors.
"It doesn't have to be this way. . . . There's opportunity to be had here to achieve grand results that will benefit our consumers, maintain innovation, keep America in the lead – and I hope that partisan politics do not snuff that out," Walden said.
Commenting on next week's hearing on a bill that has yet to be released, Rep. Cathy McMorris Rodgers (R-Wash.) said H.R. 3 is about making a point, not solving a problem. "We're becoming very good at playing partisan politics. Republicans blame the Democrats. The Democrats blame the Republicans. . . . In the meantime, people despair," she said, adding that Congress is failing Americans.
"We should be giving people hope – hope for so many who are sick, who are combating diseases or living with a disability," Rodgers said. "The hope comes through research and it comes through breakthroughs. It's not going to come through a bill that's passed by one party [and] that goes nowhere."
Given the Republican opposition to it, as well as grumblings from moderate Democrats who see it as too left-leaning, Pelosi's bill likely will be dead on arrival, RBC Capital Markets LLC analyst Brian Abrahams said. While he expects the headlines and rhetoric about the plan will maintain volatility in the biopharma sector, he said the realistic impact of any policy changes probably will be "relatively modest and perhaps even serve as a clearing event for the space."
However, Abrahams has a caveat: President Donald Trump. So far the president has been silent about Pelosi's plan, but given his "desire to claim some victory on drug pricing initiatives," Trump could push through a "watered-down, but still left-leaning, version" of H.R. 3, Abrahams said. After all, Trump did suggest using an international price index to set Part B drug prices. (See BioWorld, May 1, 2019.)
If nothing else, the possibility of Trump partnering on a version of the House bill will have the Republican-controlled Senate focusing on getting its own bipartisan pricing package out, Abrahams said. That package is expected to include more moderate measures drafted by the Senate Finance, Judiciary and Health, Education, Labor and Pensions Committees.
With health care costs continuing to grab headlines as the election season looms, Abrahams said he sees "the environment as primed to support potential for moderate drug pricing proposals that could [be] enacted by year-end, such as Part D rebate structure reform."
While he expects those reforms to have relatively low impact for the industry, he said it will all depend on the details.