The Biden administration has put forward a new slate of policy priorities, but one remains from the prior administration: prescription drug pricing. Despite many attempts, the Trump administration largely failed to deliver sweeping drug-pricing reform. President Biden has set out to enact similar reforms for lowering drug costs and can capitalize on a Democratic majority in Congress. However, the administration may need to rely on a patchwork of policies, rather than comprehensive legislation to rein in drug prices.
Legislative Pathway for Drug-Pricing Reform
H.R. 3 (Elijah E. Cummings Lower Drug Costs Now Act) and S. 2543 (Prescription Drug Price Reduction Act), put forward during the Trump administration, together represented the most comprehensive approaches to prescription drug reform in the previous Congress. The House package authorized the U.S. Department of Health and Human Services (HHS) to directly negotiate drug prices in Medicare Part D and to use international reference prices as a benchmark; the Senate favored a pared-down approach to Part D redesign and included mandatory rebates on drugs with significant price increases. While both packages included bipartisan provisions, Congress ultimately failed to enact either.
Now, the new Congress has opportunity to advance meaningful reform. A forthcoming legislative package could feature the bipartisan provisions that overlap with the previous bills: Part D benefit redesign and inflation rebates (i.e., financial penalties for price increases exceeding inflation). Both would improve prescription drug affordability for Medicare beneficiaries and limit price increases. The package also could feature smaller measures to increase competition, such as prohibiting arrangements in which drug manufacturers pay generic companies not to bring lower-cost alternatives to market (i.e., “pay for delay”) or increasing transparency on how drug prices are determined in the pharmaceutical supply chain.
If the Biden–Harris administration seeks to do more, Congress may have to resort to budget reconciliation — the legislative vehicle that allows bills to pass with a simple majority. This may open the door for Democrats to potentially pursue more partisan reforms, such as price negotiations in Part D. The policy would have to be coupled with international reference pricing, as was the case in H.R. 3, or other strategies to achieve the sufficient savings necessary for the reconciliation process.
The bipartisan provisions — Part D redesign and inflation rebates — also could potentially qualify for reconciliation, with savings to the federal government previously estimated at $34.6 billion and $57.5 billion over 10 years, respectively.
As for timing, drug pricing and other health care provisions may factor into a second reconciliation process expected later this year.
Potential Regulatory Actions
On the regulatory front for drug pricing, the Biden–Harris administration is likely to focus first on addressing Trump-era regulations. While President Biden’s regulatory freeze memo temporarily delayed recently issued Trump regulations, HHS must decide whether to retain such rules or modify them through additional rulemaking.
Most recently, the administration reversed Trump-era changes that would have loosened existing requirements for Part D plans to cover all drugs in six “protected” drug classes (anticonvulsants, antidepressants, antineoplastics, antipsychotics, antiretrovirals, and immunosuppressants). Two remaining Trump-era regulations that may be addressed by the administration include:
- Most favored nation model: A mandatory demonstration under the Center for Medicare and Medicaid Innovation that would tie Medicare Part B payments for certain drugs to international sales prices.
- Rebate rule: A final rule that would require savings from Part D rebates to be passed on directly to consumers at the point of sale instead of going to insurers and pharmacy benefit managers.
The Biden–Harris administration also will pursue regulatory initiatives of its own. These could include additional demonstration models as well as payment reforms to increase pharmaceutical competition and promote value-based purchasing arrangements for drugs. The administration is likely to announce new elements of its regulatory agenda for drug pricing in its budget request to Congress.
What’s Ahead
Whether through legislation or regulation, the Biden–Harris administration has the opportunity to advance meaningful drug-pricing reforms. The COVID-19 pandemic is likely to dominate federal activity for at least the next few months, though policymakers may again be able to turn their attention to other priorities if it recedes. Congressional Democrats will prepare for a second reconciliation process later this year, giving the new administration time to determine its own regulatory agenda for drug-pricing reform.
