US House Speaker Nancy Pelosi Introduces Drug Pricing Plan

The US House of Representatives Speaker Nancy Pelosi (D-Calif.) has introduced a proposed drug pricing plan (H.R.3, The Lower Drug Costs Now Act) to address the cost of prescription drugs. The proposed legislation would establish a fair price negotiation program, put in protections from excessive price increases under the Medicare program (the US healthcare program for people over the age of 65), and establish an out-of-pocket maximum for enrollees of Medicare Part D (the prescription drug program under Medicare).

Under the bill, the US Health and Human Services Secretary would be required to select and negotiate the prices of at least 25 negotiation-eligible drugs per year and would be authorized to negotiate prices for up to 250 negotiation-eligible drugs branded drugs per year by directly negotiating with manufacturers to establish a maximum price. Those branded negotiation-eligible drugs would be those that have been identified by the US federal government as costing the most to the federal government and for which there is no generic or biosimilar competition.The maximum negotiated price would be capped at 120% based on international pricing from the average price paid by Australia, Canada, France, Germany, Japan and the UK. If there is no international price, which is often the case with a new drug, under the bill the maximum fair price negotiated for a selected drug would generally be 85% of the average manufacturer price. The negotiated prices would be available to all purchasers not just Medicare beneficiaries.

The proposed legislation would also impose non-compliance fees on companies that do not enter into negotiations by implementing a tax on the manufacturer’s annual gross sales beginning with 65%, plus an additional 10% for every quarter the manufacturer does not comply, to a maximum of 95%.

“[W]e cannot have the non-compliance fee be the cost of doing business,” said Speaker Pelosi said in a September 19, 2019 press conference. “It has to be an incentive not to go down that path, and therefore, in relationship to what’s happening overseas, if it’s five times what we pay, if it’s two times what we pay, the non-compliance penalty, if they do no down this path, is something that would be very painful to the drug companies for not coming through.”

The proposed legislation also would penalize companies for raising drug prices for drugs belonging to Medicare Part B and D by requiring drug companies that have raised their prices above the inflation rate since 2016 to either lower their prices or rebate the portion back to the US government. The bill would also limit out-of-pocket costs for Medicare Part D beneficiaries to $2,000 per year.

The bill is co-sponsored by the House Energy and Commerce Chairman Frank Pallone, Jr. (D-NJ), the House Ways and Means Committee Chair Richard Neal (D-MA), and the Committee on Education and Labor Committee Chair Bobby Scott (D-VA) and has been referred to those committees. The House Energy & Commerce Committee began hearings on the bill earlier this week (on September 25, 2019).

Industry response

Both the Pharmaceutical Research and Manufacturers of America (PhRMA) and the Biotechnology Innovation Organization (BIO) have voiced opposition over the proposed plan.

“It would fundamentally restructure how patients access medicines by giving the federal government unprecedented, sweeping authority to set medicine prices in public and private markets while importing price controls from other countries that restrict access to innovative medicines,” said PhRMA President and CEO Stephen J. Ubl in a September 19, 2019 statement following the release of the proposal.

“It will extinguish any incentive for investors to provide the necessary funds to advance biotech medical discovery,” said BIO President and CEO Jim Greenwood in a September 19, 2019 statement. “House Democratic leaders would surrender to foreign bureaucracies the power to dictate the value of medicines and the treatments available to America’s patients. If this proposal were to become law, it will upend our country’s ability to lead the world in biomedical innovation.”

Source: US House Speaker Press Conference, H.R.3, The Lower Drug Costs Now Act, PhRMA, BIO

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