House Approves Speaker Pelosi’s Sweeping Drug Pricing Legislation

December 13, 2019

The House passed a measure that would save employers $43.1 billion in drug costs over the next ten years, according to the Office of the Actuary for the Centers for Medicare and Medicaid Services.

Some experts disagree on the benefits of the Lower Drug Costs Now Act (H.R. 3), with the Congressional Budget Office projecting eight to 15 fewer new drugs would be brought to market over the next 10 years.  

Two Republicans voted in favor in the 230 to 192 House vote.  

The far-reaching legislation would, among other things:

  • Create a “fair price drug negotiation program” in which the HHS Secretary would negotiate with drug manufacturers on a “maximum fair price” for up to 250 of the costliest drugs in the U.S. without competition—including insulin;

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

  • Require manufactures to offer negotiated prices to individuals in employer and individual health plans;

  • Penalize manufacturers that refuse to negotiate with an excise tax up to 95% of the price of the drug until an agreement is reached;

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

  • Require rebates to Medicare for Part B and D drugs whose prices have increased faster than inflation since 2015;

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

  • Expand Medicare benefits to include dental, vision, and hearing coverage.

Outlook:  While there is bipartisan support for addressing high drug prices, the White House has threatened to veto the legislation and Senate Majority Leader Mitch McConnell (R-KY) has indicated he will not take the House measure up.  While it is possible smaller measures could move through Congress given the bipartisan interest to do something before the 2020 election, the path forward remains unclear amid division and multiple competing proposals.