House Committees Advance Speaker Pelosi’s Drug Pricing Legislation

October 18, 2019

An amended version of the Lower Drug Costs Now Act (H.R. 3), which would save employers $46 billion over the next ten years according to the Office of the Actuary for the Centers for Medicare and Medicaid Services while potentially limiting the development of new drugs, has advanced through both the House Education and Labor Committee and the Energy and Commerce Committee on party-line votes.

The bills would:

  • Require the HHS Secretary to negotiate with drug manufacturers on a “maximum fair price” for 35 (25 beginning in 2023 and moving to 35 in 2033) of the most costly drugs in the U.S. that do not have competition from two or more generics or biosimilars;

  • Require manufacturers to offer the negotiated price to employer and individual health plans;

  • Limit the price to no more than 120% of the volume-weighted average price in six other countries (a.k.a., international pricing index) while indexing future increases to inflation until sufficient competition enters the market;

  • Penalize manufacturers that refuse to negotiate with an excise tax equal to 65% of the annual gross sales of the drug in the prior year;

  • Limit the ability of pharmaceutical companies to introduce new drugs at high prices;

  • Require drug manufacturers to report total manufacturing and research and development costs, total revenue and profit generated by the drugs, and other data;

  • Expand the Medicare Part D subsidy program for low-income patients;

  • Cap out-of-pocket Medicare Part D drug costs for seniors at $2,000 per year;

  • Allow Medicare enrollees to pay off what they owe in installments; and

  • Roll back price increases that have been above inflation since 2016 for all 8,000+ drugs in Medicare Part B and D.

An amendment that was adopted regarding employer health plans in the Education and Labor Committee, would require HHS and the Treasury to submit a feasibility report to Congress on a system for having drug-makers refund to employers the portion of price hikes that exceed the rate of inflation.  

Potential later addition on rebates:  A proposal by Rep. Phil Roe (R-TN) to require pharmacy benefit managers to pass 100% of drug-makers' rebates through to group health plans was not adopted but Committee Democrats expressed a willingness to work with Rep. Roe on a provision that could later be added to the bill when it goes to the House floor.

Drug negotiations and Medicare inflation rebates will save American households $158 billion from 2020 to 2029, according to the CMS Office of the Actuary.

Republicans say the bill will limit innovation and the ability of Americans to get life-saving drugs.  The Congressional Budget Office projects approximately 8 to 15 fewer new drugs would be brought to market over the next 10 years.

Outlook:  There is strong bipartisan support for addressing the drug pricing issue, but the details are creating divisions both within and between the parties.  The House Ways and Means Committee is expected to vote on the legislation next week.  The aim is to have a floor vote in the next few weeks, though there are still concerns from both progressive and centrist lawmakers.  The full House will likely pass the measure before Thanksgiving, but the House version has virtually no chance of being taken up in the GOP-controlled Senate.  A bipartisan drug pricing bill that is substantially different from the House measure has passed the Senate Finance Committee, but deep divisions in the GOP caucus about whether and how to proceed with the package raise serious questions about its ultimate passage, despite White House support.