Senate Committee Approves Bipartisan Drug Pricing Legislation

July 26, 2019

The Senate Finance Committee voted 19 to 9 to increase transparency in pharmacy benefit manager (PBM) practices and manufacturer drug pricing decisions and to limit Medicare’s prescription drug price increases by requiring drug companies to pay money back if their prices rise faster than inflation.

The bill would not directly impact employer health plans but would increase transparency by publicly posting data on aggregate drug price concessions (including rebates and discounts) as well as the aggregate amount of the difference between what an insurer pays a PBM and what a PBM pays retail pharmacies and mail order pharmacies.

Other provisions in the bill include:

  • Requiring drug manufacturers to report information and supporting documentation to the Department of Health and Human Services to justify price increases; and

  • Limiting out-of-pocket drug costs for Medicare beneficiaries to $3,100 per year starting in 2022.

It is unclear whether cost shifting to employer plans would occur.  According to the Congressional Budget Office, the bill would save $85 billion in Medicare and $15 billion in Medicaid over a decade and reduce out-of-pocket drug spending by $27 billion over 10 years.  The pharmacy supply chain could try to make up that lost revenue by raising prices overseas and through other measures.

Separately, the Trump administration is reportedly preparing another executive order on drug prices expected to be published in August.  This is in addition to a proposed rule to lower Medicare Part D drug prices that are administered by doctors and hospitals.

Outlook:  Nine of the 15 GOP committee members voted against the bill, which will discourage Senate Majority Leader Mitch McConnell (R-KY) from bringing the bill up for a vote in the full Senate unless substantial changes are made to the legislation.  House Speaker Nancy Pelosi (D-CA) has announced she will introduce her drug pricing bill in September.  Although the Trump administration withdrew its drug rebate rule, it appears ready to take further regulatory action to reduce drug costs for Medicare and Medicaid.