Gazing Back and Looking Forward: Drug-Pricing Reform in 2019 and 2020
Last year started with enthusiasm, tinged with some skepticism, for Congress and the president to pass comprehensive drug-pricing reform with bipartisan support. The year ended without a major bill-signing ceremony, and conventional wisdom holds that Washington can’t get anything done. But a closer look at drug-pricing activity in 2019 suggests reason for optimism.
First, two long-debated bills tangential to drug cost were enacted in 2019. The CREATES Act passed in December; it ends anticompetitive practices by some brand-name pharmaceutical companies that block or delay the development and marketing of generic drugs. Congress also closed a loophole in the Medicaid Drug Rebate Program that increased Medicaid spending on prescription drugs.
Beyond that, the House, Senate, and administration each moved past easy rhetoric to lay out in specific language, notable, substantive actions they would take on drug-pricing reform — an issue that was central to the 2018 midterm election and remains top-of-mind among voters. The House passed major drug-pricing legislation, and three major Senate committees advanced detailed proposals. Additionally, the Trump administration published several regulatory proposals, though none are finalized.
The Senate made progress in 2019, with the Finance Committee, the Health, Education, Labor, and Pensions (HELP) Committee and the Judiciary Committee each pushing out separate legislation related to drug pricing, though none of these bills have been debated or voted on the Senate floor yet. The most significant legislation (S. 2543), passed by the Finance Committee, would reform the Medicare Part D standard benefit to reduce costs for beneficiaries and impose an inflation rebate penalty for manufacturers of drugs covered by Medicare Parts B and D that have price increases exceeding inflation. Floor action on S. 2543 was delayed, allowing time to win more Republican support.
In December, the House passed, with support from every Democrat and three Republicans, comprehensive drug-pricing legislation, H.R. 3. The bill included price negotiations between the federal government and drug companies that would lower prices for prescription drugs not only in Medicare, but also for people in private health plans. Similar to S. 2543, it included inflation rebate penalties and a Medicare Part D redesign.
The administration made several efforts to tackle drug pricing with executive authority in 2019. A proposed rule seeking to push prescription drug rebates directly to consumers was withdrawn in July over congressional concerns that it could increase Part D beneficiary premiums. Likewise, a finalized rule requiring drug companies to disclose prescription drug list prices in television ads is currently blocked by a federal court after drug companies sued the U.S. Department of Health and Human Services (HHS). Additionally, a proposed rule on International Price Indexing (IPI) was sent to the Office of Management and Budget (OMB) for review six months ago, but it has yet to be released publicly. Lastly, in December, HHS proposed a rule to allow drug importation, which was met with muted reaction among stakeholders. The proposed rule could be finalized this year.
Congress and the administration have an opportunity this year to reconcile their approaches, though substantial policy differences remain. Committee chairs in both the House and the Senate see benefit in finding agreement on comprehensive drug-pricing legislation before the election. They also broadly agree on the structure of Medicare Part D reform and on mandating manufacturer rebates for drug-price increases that exceed annual inflation, as well as on other smaller provisions. However, they disagree on whether those measures alone would be sufficient to bring down the price of high-cost prescription drugs for the federal government and commercial market.
From the beginning, the House has insisted that truly comprehensive legislation must address very high prices, not just price increases, by including drug-price negotiation. However, the Chairman of the Senate Finance Committee remains firmly opposed to price negotiation. Passing a bill reforming the structure of Medicare Part D and instituting rebates for high drug-price increases would be significant and seems reasonably achievable. However, in doing so, the House would lose the opportunity to enact price negotiation and directly address the drugs currently imposing the highest costs on patients and our health system.
Congress must pass a bill extending health programs that are otherwise set to expire on May 22. This “extenders” package is viewed as the final opportunity and most likely vehicle for any 2020 drug-pricing agreement. To include drug-pricing legislation in the extenders package, Senate Finance Committee Chairman Chuck Grassley must find more Republican Senate votes between now and the end of May to persuade Senate Majority Leader Mitch McConnell to bring such a bill to the Senate floor. Additionally, the House and Senate must find a compromise that the House believes sufficiently addresses high-cost drugs.
The time spent on drug-pricing policy development in 2019 by both Congress and the administration suggests further action before national elections on November 3 is likely. If a legislative drug-pricing agreement is not reached by May 22, the administration may decide to move forward with the controversial IPI proposed rule currently at OMB. Whether this administrative action is a sufficient threat to motivate Congress into finding an agreement remains to be seen.