July 25, 2019

Senate Finance Committee Proposes “Prescription Drug Pricing Reduction Act of 2019”

Last Tuesday, the US Senate’s Finance Committee, led by Chairman Chuck Grassley (R-Iowa), agreed on a bill to overhaul parts of Medicare and Medicaid. Ranking member Senator Ron Wyden (D-OR) called the bill “an important first step in the work that lies ahead to lower prescription drug prices for families.” The Committee’s statement adds that, “this legislation shows that no industry is above accountability.”

According to Politico, the bill, called the “Prescription Drug Pricing Reduction Act of 2019,” will move the cost of prescription drugs from patients and the government to health plans and drugmakers. Health plans, it proposes, “would pick up 40 percent of catastrophic phase costs while drugmakers would pay 20 percent and seniors’ spending in that phase would be eliminated.”

One particularly controversial issue in the bill is the establishment of caps, in both Medicaid Part B and Part D, on price hikes that exceed the rate of inflation. If passed, this bill would require manufacturers that raise their prices above the rate of inflation to pay rebates to the government. The Congressional Budget Office (CBO) projects that substantial savings would result from “the proposed Medicare Part D redesign and these inflation caps.”

The CBO estimates that this mechanism would account for $50 billion of savings and would “apply only to brand-name drugs and not generics,” according to Grassley’s office. Medicare beneficiaries, the CBO adds, would likely save $27 billion in out-of-pocket costs and $5 billion in premium spending from the two policies.

The Prescription Drug Pricing Reduction Act of 2019 is expected to elicit the Administration’s support, given its commitment to bringing US pharmaceutical prices in line with those of other developed countries. A full Senate vote on this bill is expected by the fall.