October 3, 2019

The Evolution of a Drug Pricing Bill

The first draft of HR 3 Drug Pricing Proposal, submitted for consideration by Speaker of the House Nancy Pelosi last month, is revolutionary in several respects including its specification that “the prices negotiated by the HHS secretary would apply to the private market as well, not just Medicare.” Formally known as the “Plan to Lower Prescription Drug Costs,” Pelosi’s bill also stipulates that the International Price Index – rather than already inflated U.S. prices – would provide the normative standard for determining domestic price reductions.

Further, the bill would penalize pharmaceutical companies who choose not to negotiate with HHS by charging “a fee of 75 percent of the gross sales of the drug in question from the previous year.” These provisions are consistent with recommendations raised last May by members of the House Committee on Oversight and Reform chaired by Rep. Elijah Cummings (see previous column here).

Last July, Senator Charles Grassley (R-IA) and Ron Wyden (D-OR) introduced a bill on this issue that primarily requires drug companies raising their prices faster than the rate of inflation to pay rebates to Medicare. It also proposes to cap out-of-pocket drug costs for Medicare recipients. These are both issues featured in HR 3.

None of the legislation proposed to date has included language affecting ARV prices specifically. Our success last May in getting ARVs excluded from Medicare’s decision to apply tighter utilization management restrictions to the “six protected classes” of chronic diseases illustrates our ability to push back successfully when necessary. As this bill develops, we remain watchful for any provisions that could affect people with HIV and will support or oppose such legislation once a bill starts to move.

The most recent challenge to HR 3 emerged on September 30 in the form of a “Dear Colleague” letter by Rep. Lloyd Doggett that calls for “necessary improvements” to Pelosi’s bill. Generated by Progressives in the House, the letter calls for the legislation to go further to lower drug prices.

In particular, these House members argue for price control on all drugs, not on just a minimum of 25 and a maximum of 250 per year and note that HR 3, as written now, would fail to control the prices of drugs new to the market.

They also reject the idea that a drug price will be subject to mandatory negotiation only if it has no generic competitors. Doggett, in his letter, observes that, under those terms, EpiPen would never have been subject to price controls in 2016.

Another issue recently raised is that HR 3, as currently drafted, could impede the 340B program, a federal drug discount program designed to provide support to hospitals and clinics serving poor people. The federal drug discount program, 340B enables some hospitals and clinics to buy their medicines at a deep discount. Medicare and other insurers reimburse them for the drugs at the customary higher prices. The 340B facility then uses the difference to help pay for their charity care, counseling services, and other essential costs.

According to Stat News, “a 60-word provision tucked into Nancy Pelosi’s signature drug pricing plan could wreak havoc on hospitals that serve the poor.” The Heritage Foundation, an entity opposed to HR 3 for multiple reasons, has seized on this facet as a potential “poison pill” and is using it in its efforts to discredit the whole bill.

Speaker Pelosi has expressed some openness to making changes to HR 3. For his part. Rep. Doggett noted in his letter that, ‘My objective is not to let the perfect get in the way of the good, but to ensure that the good we seek actually reaches those whom we serve. In short, more work and amendments are needed to make H.R. 3 effective in achieving our shared objective of lowering drug prices for American families.”

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