BIO expects year-end drug pricing legislation

Congress is likely to enact drug pricing provisions as part of a year-end budget bill rather than as stand-alone legislation, BIO President and CEO Jim Greenwood said Monday. While there is unanimity on Capitol Hill about the need to make drugs more affordable, there are sharp divisions within and between Democrats and Republicans over the best way to tackle the issue.

Greenwood told reporters his prediction is based in part on recent discussions with staffers for Senate Majority Leader Mitch McConnell (R-Ky.).

Shoehorning drug pricing measures into a budget bill allows Senate and House leaders to forge deals behind closed doors, minimizing opportunities for stakeholders, or rank-and-file members of Congress, to influence -- or even be aware of -- the content of legislation until it is too late to change it.

A budget deal could draw elements from drug pricing bills that have passed the Senate Finance and Health, Education, Labor and Pensions (HELP) committees, ideas the House Democratic leadership is expected to unveil soon, and Trump administration proposals.

Decisions by Democrats and Republicans to try to find common ground on drug prices will take into account calculations about the effects of a deal on 2020 elections.

Finance bill

Senate Finance Committee Chairman Chuck Grassley (R-Iowa) barely managed to get the Prescription Drug Pricing Reduction Act of 2019 out of his committee after Republicans balked at the inclusion of an inflation cap on Medicare Part D drug prices (see “Republicans Balk at Senate Finance Drug Pricing Bill”).

The Finance Committee bill would save the federal government -- and cost drug companies -- $100 billion over 10 years, according a Congressional Budget Office estimate.

Biopharma companies oppose the inflation cap, arguing that it undermines the competitive structure of the Part D program and imposes large costs on drug companies. “Not only is it bad policy to impose price controls, but the amount of money extracted from the industry in this bill is horrendous,” Greenwood said.

“If you look at what the industry gives back in Medicare discounts, the [Part D] donut hole, and 340b [discounts for hospitals that serve the poor], it is nearly $100 billion a year,” Greenwood added. “Now along comes the Senate and says ‘we’d like to see you $100 billion and raise you another $100 billion.’”

Although it has gone to war against Part D inflation caps, BIO supports elements in the Grassley bill, especially creating an out-of-pocket cap on Medicare Part D costs, Greenwood said.

The trade association is lobbying McConnell to modify the proposed $3,100 annual out-of-pocket cap by spreading the cost evenly throughout the year rather than requiring that beneficiaries deplete their savings before the out-of-pocket cap kicks in.

Ensuring that no Medicare beneficiary has to pay more than a few hundred dollars a month for drugs would help patients and would be a “huge political accomplishment,” Greenwood said.

That accomplishment will happen only with President Donald Trump’s consent, as McConnell will not allow a vote on a budget deal or any other legislation unless it has Trump’s approval.

So far, Trump has focused on reducing drug prices rather than out-of-pocket costs, Greenwood acknowledged. “We have had no success in getting the president to focus on a Medicare out-of-pocket cap as something that would be a moral and political victory,” he said.

In addition to capping out-of-pocket costs, the Finance bill seeks to restructure Part D by eliminating the coverage gap, or donut hole. It shifts drug industry liability from the current 70% discount provided in the donut hole to a 20% responsibility for all drug costs patients incur after they have met the out-of-pocket spending cap.

The change would boost the fortunes of companies that market drugs with costs below or near the out-of-pocket threshold and place increased costs on those that sell more expensive drugs.

It would also hurt companies that sell drugs used primarily by beneficiaries who receive a low-income subsidy (LIS). Individuals with incomes up to 150% of the poverty level are eligible for the LIS program.

Under the current structure there is no donut hole, and hence no subsidy, for LIS beneficiaries (see “Senate Finance Committee Bill Shocks Biopharma Companies”).

BIO supports eliminating the donut hole and hopes to persuade the Senate to spread the drug industry’s liability throughout the entire benefit, Tom DiLenge, BIO’s president for advocacy, law & public policy, told BioCentury.

HELP bill
The Lower Health Care Costs Act (S. 1895), which passed the HELP Committee in a 17-3 bipartisan vote, seeks to squeeze PBM profits out of the drug supply chain, eliminate tactics branded drug manufacturers use to block generic and biosimilar competition, and smooth the path to market for biosimilars (see “Senate Committee Passes Bill Squeezing PBMs”).

Under S. 1895, PBMs would not be permitted to profit from rebates charged to drug companies in exchange for formulary placement. The bill requires that PBMs pass to health insurers 100% of any rebate paid by a drug manufacturer.

The bill would outlaw spread pricing in which PBMs charge more to payers or patients than the PBM’s acquisition cost.

S. 1895 incorporates the Creating and Restoring Equal Access To Equivalent Samples (CREATES) Act, legislation that is intended to eliminate some business practices that slow or block the development of generics and biosimilars.

The bill also seeks to prevent branded drug manufacturers from using the Citizen’s Petition process to block generic competition. It allows FDA to deny a petition that the agency believes is intended primarily to delay approval of a generic drug and requires HHS to establish procedures for referring such petitions to the Federal Trade Commission (FTC).

The House and the White House

House Speaker Nancy Pelosi (D-Calif.) is expected to release a drug pricing plan this month.

The plan will reflect discussions Pelosi’s staff has had over the summer with White House staff, including Domestic Policy Council Director Joe Grogan, and with progressive Democrats.

In public and private meetings, Pelosi’s staff has suggested that the plan will provide for binding arbitration of the prices of about 250 drugs, and that it would apply to both Medicare Part D and the private sector.

The Pelosi plan is being crafted to appeal to voters in November 2020, not to Senate Republicans in December 2019.

Separately, Secretary of HHS Alex Azar is continuing to press for an international reference pricing system for Part B Medicare drugs, despite public opposition to the idea from conservative Republicans, including Grassley (see “Azar’s IPI” and “Grassley Opposes International Pricing Index”).

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