As we outlined earlier this spring, congressional action on drug pricing continues to intensify. Key committees have advanced an array of reforms, demonstrating Congress’ intent to finalize legislation this year. We aim to clarify what that might include.
The Senate: Our North Star
While work on drug pricing has been a bicameral affair, the Senate may have greater influence over the final package. Republican control of the chamber, accompanied by their lack of a veto-proof majority, prompts the need for a viable bipartisan proposal. We therefore examine four major themes of reform that have emerged in the Senate and corresponding action in the House.
Several Senate proposals would shed light on pharmaceutical pricing. First, the Senate Judiciary Committee passed a bill requiring the Federal Trade Commission (FTC) to report on the role of supply chain intermediaries, including pharmacy benefit managers (PBMs); their effect on market competition; and whether stakeholders require more information.
Meanwhile, the Senate Health, Education, Labor, and Pensions (HELP) Committee included in its Lower Health Care Costs Act various transparency-related provisions:
- Requiring health plans to issue oversight reports describing key PBM pricing information;
- Prohibiting “spread pricing,” a practice in which a PBM charges more for a drug than it initially paid to acquire it;
- The FAIR Drug Pricing Act, requiring manufacturers to provide reasoning for substantial price increases; and
- Improvements to the FDA’s “Purple” and “Orange” Books, which the agency uses to inform generic manufacturers and others on branded drug patents. Specifically, the legislation would clarify that the Orange Book must include information on the drug’s patent number and expiration date. It also would require the prompt removal of information if the federal government invalidates a drug’s patent. Such changes would better inform generic manufacturers when they can legally begin to produce generic equivalents. Similarly, the legislation would require the inclusion of extensive patent and exclusivity information in the Purple Book, which currently lists all FDA-licensed biological products.
The House passed legislation requiring the FTC to examine the role of PBMs and improving the Purple and Orange Books. The Energy and Commerce Committee also advanced the FAIR Drug Pricing Act, packaged in the METRIC Act.
The Senate Judiciary Committee advanced reforms to the patent system designed to increase competition and lower prices, including:
- The Stop STALLING Act, which authorizes the FTC to take action against brand manufacturers who file “sham” citizen petitions against generic products, intended to stall the approval of such products and thereby prevent competition; and
- A bill that would curtail “product hopping” and “patent thickets.” Product hopping is a practice in which brand-name manufacturers make modest, but arguably not meaningful, changes to drug formulations to extend the duration of patent protections. Patent thickets exist when brand manufacturers issue several different yet complementary patents for a single drug, which result in the need for extensive litigation if a generic manufacturer wishes to replicate the product.
The House Judiciary Committee also advanced legislation similar to the Stop STALLING Act.
Increasing Access to Generics
The HELP Committee passed several provisions to increase access to generic drugs:
- The CREATES Act would allow generic manufacturers to bring civil action against a brand manufacturer if it fails to provide sufficient product samples, which are required to develop generic alternatives. It also would limit the ability of brand manufacturers to prevent generic competition by blocking generic manufacturers from participating in the brand product risk evaluation and mitigation strategy.
- Preventing first-to-file generic drug applicants from blocking the entrance of other generic drugs to the market beyond the applicant’s 180-day exclusivity period — a period of time granted by the FDA in which the manufacturer who first requests the ability to market a generic version of a drug is the only manufacturer allowed to market it, as a means of incentivizing manufacturers to engage in the often risky and litigious generic drug application process.
- Improvements to the generic approval process.
The House advanced bills that would prevent the “blocking” of additional generic drugs and the CREATES Act.
Reforming Medicare Part D
The Senate Finance Committee recently advanced several meaningful changes to Part D, estimated to lower beneficiary and federal expenditures. Major provisions include:
- Capping enrollee cost-sharing above the catastrophic out-of-pocket limit;
- Requiring manufacturer rebates if certain Part D drugs’ list prices increase faster than inflation;
- Establishing a new annual out-of-pocket spending amount needed to trigger the catastrophic coverage phase of $3,100 in 2022, indexed to the growth in Part D spending; and
- Lowering Medicare’s liability in the catastrophic phase of the Part D benefit, which under the bill would begin after out-of-pocket spending exceeds $3,100. Currently, beneficiaries pay 5 percent of costs in the catastrophic phase, insurers pay 15 percent, and Medicare pays 80 percent. Under the Senate Finance proposal, enrollees would pay nothing after reaching $3,100 in out-of-pocket spending, while insurers would pay 60 percent and manufacturers would pay 20 percent. Medicare would then assume the remaining 20 percent of costs.
The Senate Finance proposal somewhat mirrors the spirit behind draft language from the House Ways and Means Committee, though further detail on the House’s plan has yet to surface.
The Pelosi–Trump Complication
While Congress has advanced its suite of initiatives, House Speaker Nancy Pelosi and President Trump have been attempting to craft their own proposal, reportedly centered on allowing the federal government to negotiate the price of high-cost drugs without competition in Medicare Parts B and D.
Their efforts are in jeopardy, however. The relationship between Speaker Pelosi and President Trump is strained at best; the pieces already moving in Congress appear to have more momentum. Moreover, Senate Republicans are unlikely to support what they consider to be government price-setting, even with the President’s support. In fact, Senate Majority Leader Mitch McConnell has refrained from participating in these discussions, signaling his preference for bipartisan legislation moving through Congress. Last, the House’s Progressive Caucus has threatened to oppose any deal not aligned with their more far-reaching goals, and all along has criticized the Pelosi–Trump plan for not going far enough.
The Final Package: What to Expect
Pelosi–Trump negotiations aside, the otherwise substantial bipartisan, bicameral overlap on drug pricing provides a blueprint for what Congress may deliver. The final package will likely include increased supply-chain transparency, improved competition through increased access to generics and patent reforms, and new incentives in the Part D program to promote more affordable pricing. Other options for reform certainly exist, though the present docket stands to deliver substantive changes in its own right.
Congress has a great deal of work to do when it returns from recess in September. We may see pivotal action this fall. If not, long-sought drug pricing reforms may yet again be shelved for another day.