How The House Prescription Drug Plan Would Try To Lower Drug Prices

Practically everyone is frustrated by high prescription drug prices. Voters have made clear they want Congress to do something about them.

The House of Representatives is voting Thursday on a bill that tries to deliver on that. It's highly unlikely to get through the Senate, and the White House has announced that President Trump would veto it if it came to his desk.

But the bill, H.R. 3, titled the Elijah E. Cummings Lower Drug Costs Now Act, does have several components that are reflected in other proposals in Congress, including a bipartisan bill in the Senate that might have better prospects.

"Obviously, Speaker Pelosi's proposals are the most ambitious — they're also the furthest from becoming actual law," says Benedic Ippolito, an economist at the American Enterprise Institute, a conservative think tank in Washington.

The bill lays out a vision for how Democrats would like to remake prescription drug pricing in this country, which could be seen as a promise to deliver on a bill like this if voters choose Democrats in the upcoming election.

Ippolito says he's glad to see some real proposals to address this issue. "It's not every day that we see both parties actively proposing legislation to meaningfully reduce drug prices," he says. "Whether one loves H.R. 3 or not, I think it's still a good thing that we have both parties taking this issue seriously."

So what's in House Speaker Nancy Pelosi's bill? It's complicated and 450 pages long, but here are some key parts.

Allow the government to negotiate

This is the most aggressive and controversial part of the bill. It would direct the secretary of health and human services to negotiate with drugmakers on the price of their medications for Medicare. Currently, direct government negotiation is forbidden by legislation passed in 2003.

In this bill, only a certain pool of 250 drugs would be eligible for negotiation, and the secretary would have to negotiate a minimum of a few dozen drugs each year. To be in the pool of eligible drugs, a drug has to cost Medicare a lot and not have any generic competition. (Insulin is explicitly included as well — its cost has garnered a lot of public outrage.)

The government would use the cost of these drugs in other countries as a reference in negotiation, and if the drugmaker refused to cooperate, it would be taxed. The price agreed on for Medicare after negotiation would be available to commercial insurers as well, though they could also try to negotiate lower prices.

This part of the legislation is not in the bipartisan Senate bill. In September, when Pelosi was asked if she would consider leaving it out, she said: "Absolutely, positively, not," and added: "That is the central point."

Limit out-of-pocket costs for Medicare enrollees

Right now, there's no limit for how much seniors and others on Medicare spend on drugs out of pocket — unlike in most insurance plans. This bill would set a limit for Medicare patients at $2,000 a year.

It's not just seniors who get a break here. Right now, after an enrollee has spent several thousand dollars on drugs, they're on the hook for 5% of ongoing costs, their prescription drug plan pays 15% and Medicare pays 80% — drug companies don't pay any part of it. Under the bill, that splitting gets changed around: Patients pay nothing after they hit the new cap, drug companies pay 30% and Medicare and health plans pick up the rest.

Stacie Dusetzina, a health policy professor at Vanderbilt University who has written extensively about Medicare Part D, says that drug prices were overall "much lower" in 2003, when Medicare Part D became law. (Before that, Medicare didn't cover drugs at all.) And, she says, many new, high-cost treatments have entered the market since then.

"In areas like cancer or multiple sclerosis or hepatitis C, all of these treatments are very, very expensive," she says. "So even if you only have to pay 5% of the drug's price, it gets incredibly expensive for the patient, and there's just no limit."

There's widespread agreement in Congress that this needs to be fixed. The bipartisan bill in the Senate has a similar redesign of who pays for expensive drugs, and it has an out-of-pocket cap for enrollees, although it's set a bit higher — at $3,100 per year.

Prevent drug price hikes

Right now, drugmakers can raise the price of a drug as much as they want, whenever they want, as long as the market can bear it. Under this House bill, if drugmakers raise prices for drugs in Medicare faster than inflation, they'll need to give rebates back to the government.

"The Senate Finance Committee bill does contain similar provisions that would prevent pharmaceutical companies from raising their prices faster than the rate of inflation," notes Rachel Sachs, a law professor at Washington University in St. Louis who studies drug pricing. Those overlaps make it seem possible that some parts of this bill could ultimately become law.

"We could see a narrow result from this debate that would help out these seniors," Sachs says. "However, it wouldn't help other Americans, and it wouldn't help address the underlying causes of these high drug prices."

Dusetzina notes that there's a risk in leaving out the government negotiation of drugs — the part of Pelosi's bill that has the least bipartisan support and that has generated the most pushback.

"Companies might not raise their price as often, but they could start with a higher price to compensate," she says. "So doing one of the things without doing the other may actually make drug prices as expensive — or potentially more expensive — than they are today."

There are a lot of debates about how this — or any legislative fixes — might impact innovation or change the market in other unexpected ways. "It's one of those things where we won't probably know the real effects until we try to make some changes," she says, adding that when it comes to drug pricing, doing something is probably better than sticking with the status quo. [Copyright 2019 NPR]