Congressional Democrats on Tuesday announced they had agreed to a broad plan to overhaul the way America pays for prescription medicines.
Under the deal, Medicare would be allowed to negotiate drug prices for both drugs dispensed at the pharmacy counter and those administered in doctors’ offices for drugs older than 9 years or 12 years, depending on the type of drug. Drug makers would have to pay penalties if they hike prices faster than inflation, including for employer-sponsored insurance plans. Seniors’ out-of-pocket costs would be capped at $2,000 per year. Insulin prices per dose will also be capped.
Moderate Democrats including Sen. Kyrsten Sinema (D-Ariz.) and Reps. Scott Peters (D-Calif.) and Kurt Schrader (D-Ore.), who all had reservations about Democratic leadership’s more aggressive drug pricing ambitions, endorsed the deal. Senate Majority Leader Chuck Schumer said the deal also has the White House’s support.
“It’s not everything we all wanted. Many of us would have wanted to go much further, but it’s a big step in helping the American people deal with the price of drugs,” Schumer told reporters.
The package’s path forward is unclear, but its inclusion at all is a coup for Democrats facing stiff opposition from the pharmaceutical industry. Just last week, President Biden announced the White House was abandoning the entire effort to lower drug prices because progressives and liberals were too far apart to cut a deal.
Many important legislative details remain unclear, but there are already some clear winners and losers.
Winner: House Speaker Nancy Pelosi
Pelosi snatched victory from the jaws of defeat after the White House shunned the policy on Thursday morning. Pelosi launched into dealmaking mode, and her office was on the phone with key stakeholders by that evening. Pelosi personally spoke with Sinema both Friday and Tuesday to hammer out a deal, a source told STAT after Punchbowl News reported the calls.
Pelosi’s team has fought for Medicare to negotiate drug prices for more than 15 years, and if it becomes law, the policy will provide an opportunity for Democratic members to tout a major win on the campaign trail ahead of the 2022 midterm elections.
Winner: Moderate Democrats
An unlikely cadre of pharmaceutical industry-friendly lawmakers ended up being the decision makers on prescription drug pricing because Congress’ margins are so narrow. Sinema, Peters and Schrader flexed outsized muscle for rank-and-file lawmakers, and steamrolled Medicare negotiation plans that House and Senate leadership had been crafting for years.
House Democratic leaders had envisioned a sweeping Medicare negotiation authority that would allow the government to bargain for the most expensive drugs, but moderates extracted big concessions to protect drugs for years once they enter the market.
Though there was tussling toward the end of negotiations, employers successfully fought to ensure drug makers would be penalized if they hike prices in the commercial insurance market. The nitty-gritty details remain unclear, but this bill would force drug makers to pay penalties if they raise their drug prices faster than inflation.
Employers had been concerned that if drug makers got less money from Medicare, they’d jack up their prices elsewhere. Experts disagree about how much drug makers would have been able to shift costs, but extending some price controls to commercial markets is a significant achievement.
Winner: Seniors with high drug costs
These policies may not make a measurable difference for every consumer who takes prescription drugs, but it seems that it would help seniors who have high bills at the pharmacy counter. Drug costs can be a huge burden for patients taking expensive medications, and capping seniors’ out-of-pocket costs annually, and for each month to avoid especially high spending early in the year, could go a long way to ensuring peace of mind.
Consumer groups including AARP, Families USA, and Patients for Affordable Drugs applauded the high-level agreement, though they said they are awaiting full details.
Loser: Drug makers
The pharmaceutical lobby won some battles on these policies. And it’s likely they will find ways to lessen their impact. But after the White House very publicly abandoned drug pricing reform entirely, Democrats in Congress robbed a colossal victory from the drug industry at the eleventh hour.
The creation of an infrastructure for Medicare negotiation is a big loss here. Drug makers had the chance to accept more incremental, bipartisan reform last Congress, but they stonewalled it. If this new Democratic deal becomes law, that tactic may have cost them, in hindsight. They will no doubt put up a fight as the deal moves forward through the legislative process, and if the changes make it to the regulatory process.
Loser: Progressive Democrats
Lawmakers pushing for aggressive prescription drug pricing reform for years are going to be disappointed by this deal. The final product is watered down significantly from their vision of price limits applied to every American for a wide array of drugs. A negotiation framework painstakingly crafted by Senate Finance Chair Ron Wyden (D-Ore.) was cast aside, and most likely, it will never see the light of day.
Rep. Peter Welch (D-Vt.), a member of the Congressional Progressive Caucus who has championed drug pricing reform for years, praised the deal even though he had advocated for much stronger legislation.
“To be clear: this isn’t enough. But in the face of Big Pharma’s power and deception, we have made significant progress with this deal,” he tweeted Tuesday.
Loser: Pharmacy benefit managers
After skating by scot-free as negotiations progressed, the middlemen between insurance companies and drug makers will face more transparency requirements, according to a summary of the deal circulated by Peters’ team.