Keenan Blog

Federal and State Lawmakers Grasping to Control Prescription Drug Pricing

November 13, 2019

If the number of bills is any indication, legislators in Washington and across the country consider prescription drug pricing to be one of the most important issues for lawmakers today. We are currently tracking the progress of more than 100 federal bills and 186 bills in the fifty states that seek to address drug pricing. The approaches to drug pricing reform vary considerably, and reflect differing opinions on the cause of drug pricing increases as well as different philosophies on the best way to curb price hikes. However, the volume alone indicates a shifting landscape on drug pricing policy.

In the last week of October, the U.S. House of Representatives passed two drug pricing reform bills. The Payment Commission Data Act of 2019 (H.R. 1781) would provide several federal commissions that provide recommendations to Congress concerning the Medicare and Medicaid programs with access to drug pricing and rebate data. The intent of this bill, which was written by Rep. Buddy Carter (R-GA) is to assist Congress to better understand how the prescription drug market is operating.

Also passed at the end of October was The Public Disclosure of Drugs Discounts Act (H.R. 2115.) Introduced by Rep. Abigail Spanberger (D-VA) and a number of Democratic and Republican cosponsors, H.R. 2115 would require Pharmacy Benefit Managers (PBMs) to report their aggregate rebates, discounts, direct and indirect remuneration, administrative fees and price concessions that are passed through to plan sponsors. The U.S. Department of Health and Human Services (HHS) would then post that information on its website in a way that does not identify individual drugs or plans. The intent of this bill is to increase transparency from PBM service providers, so as to assist payers in comparing the discounts PBMs receive from drug manufacturers.

The bill that has gotten the most media attention is H.R. 3, introduced by House Speaker Nancy Pelosi (D-CA). Dubbed the “Lower Drug Costs Now Act of 2019,” H.R. 3 would allow Medicare to negotiate prices on 250 of the most expensive drugs each year. The discounts negotiated by Medicare would apply to private plans as well as public. The bill includes steep penalties for drug manufacturers that either fail to negotiate with Medicare or fail to come to an agreement. Manufacturers would be assessed 65% of the gross sales of the drugs on which an agreement was not reached. That penalty would increase by 10% each quarter until an agreed price was reached. H.R. 3 would also set a $2000 out-of-pocket OOP maximum for Medicare Part D, and it would penalize drug companies that raise prices faster than the rate of inflation. The Congressional Budget Office (CBO) has estimated that, if enacted, H.R. 3 would save the federal government $345 billion over ten years. The bill is expected to go to a full House vote by the end of the year, despite vociferous opposition from drug manufacturers.

It is unclear if any of these bills will be taken up in the Senate, but the Senate is also considering its own drug pricing legislation. The bill with the greatest chances of passage is the “Prescription Drug Pricing Reduction Act of 2019” (S. 2543), authored by Senator Chuck Grassley (R-IA) and Ron Wyden (D-OR). S. 2543 would set the OOP maximum for Medicare Part D at $3100, starting in 2022, and like the Pelosi bill would penalize drug companies if drug prices rise faster than the rate of inflation. It would require drug manufacturers to justify certain prescription drug price increases to HHS and it would also require PBMs that work with Medicare to report discounts. The CBO has estimated that the bill would save Medicare beneficiaries approximately $27 billion and would save the federal government $85 billion over ten years.

There is a growing consensus that “something” must be done on prescription drug pricing. Recent polling conducted by the non-partisan Kaiser Family Foundation (KFF) found that almost a quarter of adults (including 23% of seniors) say it is difficult to afford their prescription drugs and one in ten say it is “very difficult.” This sense of difficulty is backed up by the numbers. A recent report from California’s Office of Statewide Health Planning and Development (OSHPD) showed that drug companies had raised the whole acquisition cost (WAC), or the list price for wholesalers without discounts or rebates, by a median of 25.8% from 2017 through the first quarter of 2019. The impact of these increases has certainly been felt by employer plans as well as their employees.

There is also some bipartisan consensus on the steps to be taken. Overwhelming majorities of those polled by KFF (regardless of political party affiliation) favored requiring drug companies to include list prices in ads, making it easier for generic drugs to come to market, allowing negotiation with drug companies on prices in the Medicare D program, allowing Americans to buy drugs important from Canada, and placing an annual limit on out-of-pocket costs in the Medicare D program. The popularity of many of these ideas can be found in the bipartisan support for some of the bills in Congress summarized above. It remains to be seen whether Congress will be able to act.


About Amy Donovan
Amy is Keenan's Vice President of Legislative and Regulatory Affairs, authoring the firm's Briefings and position papers on legislation, regulation and litigation that have an impact on the firm and its clients.