On Dec. 12, the U.S. House voted to pass legislation that would allow Medicare to negotiate drug costs with pharmaceutical companies.
The legislation — known as the Elijah E. Cummings Lower Drug Costs Now Act, or simply H.R. 3 — passed on a largely party-line vote. It’s a priority for Congressional Democrats, who celebrated their victory in the House. In the Republican controlled-Senate, however, the bill faces an uphill battle, and President Donald Trump has threatened a veto.
So what does H.R. 3 do?
It requires the Centers for Medicare & Medicaid Services to negotiate with drug companies to set maximum prices for certain drugs, including:
• at least 25 single-source, brand-name drugs “that are among the 125 drugs that account for the greatest national spending”; and
• at least 25 that are among “the 125 drugs that account for the greatest spending under the Medicare prescription drug benefit and Medicare Advantage,” according to a Congressional summary.
The negotiated maximum prices would also be offered under private health insurance plans unless the insurer opts out.
Under H.R. 3, maximum prices couldn’t exceed 120 percent of the drug’s average price in Australia, Canada, France, Germany, Japan and the United Kingdom — or, if that data isn’t available, 85 percent of the U.S. average manufacturer price. Drug companies that fail to comply with these requirements incur civil and tax penalties.
Plus, H.R. 3 would require drug companies to issue rebates for covered drugs that cost $100 or more and for which the average manufacturer price increases faster than inflation, and it would reduce the annual out-of-pocket spending threshold.
H.R. 3 also includes provisions to add dental, vision and hearing coverage for Medicare patients.
The Congressional Budget Office and the staff of the Joint Committee on Taxation estimate that H.R. 3 would increase federal spending by about $40 billion and increase revenues by about $46 billion between 2020 and 2029 — reducing the federal debt by about $5 billion over those 10 years.
But their analysis also identified a drawback: Drug companies may be less likely to develop new drugs.
“Those effects would occur because the potential global revenues for a new drug over its lifetime would decline as a result of enactment, and in some cases the prospect of lower revenues would make investments in research and development less attractive to pharmaceutical companies,” the CBO noted.
In a Dec. 3 statement, the White House cited an estimate by its own staff that the bill could prevent as many as 100 drugs from entering the U.S. market. Trump is widely expected to veto the bill on the slim chance it passes the Senate.
“Heavy-handed government intervention may reduce drug prices in the short term, but these savings are not worth the long-term cost of American patients losing access to new lifesaving treatments,” the White House statement argued.
Colorado’s four Democratic representatives voted in favor of the bill, while its three Republicans, including Rep. Doug Lamborn of El Paso County, were opposed. Reps. Diana DeGette and Ed Perlmutter, both Democrats, signed on as cosponsors.
“People in our community cannot continue to be gouged by these historically high prices, while at the same time Big Pharma makes historically high profits,” Rep. Jason Crow, another Colorado Democrat, said on a press call Dec. 6.
State Rep. Janet Buckner, a Democrat from Aurora, also noted on the press call that Colorado recently became the first state to pass a bill capping the cost of insulin.
“I’m a member of the health insurance committee, and I heard so many stories of people who were struggling with these costs of health care and prescription drugs, and they sometimes have to choose between their basic living needs and their prescription drug,” Buckner said. “This is unacceptable.”