Senate Finance Committee Unveils Bipartisan Bill to Lower Drug Costs

Spearheaded by Senate Finance Committee Chairman Chuck Grassley, R-Iowa, and Ranking Member Ron Wyden, D-Oregon, the bipartisan bill would lower out-of-pocket (OOP) costs for Medicare and Medicaid beneficiaries and save the government billions.

The Senate Committee on Finance has introduced bipartisan legislation to increase transparency and address high drug costs. Spearheaded by Committee Chairman Chuck Grassley, R-Iowa, and Ranking Member Ron Wyden, D-Oregon, the bill would lower out-of-pocket (OOP) costs for Medicare and Medicaid beneficiaries and save the government billions.

The bill, “Prescription Drug Pricing Reduction Act of 2019,” includes an overhaul of parts of Medicare and Medicaid, including requiring drug manufacturers to pay a rebate to Medicare if their price hikes surpass the inflation rate. This, combined with a proposed restructuring of the Part D benefit, would save Medicare $85 billion over the next 10 years, according to estimates from the Congressional Budget Office (CBO). CBO also estimates that beneficiaries would save $27 million in OOP costs over the same period.

The Part D redesign would eliminate the coverage gap and initiate 25% cost sharing between the annual deductible and the catastrophic threshold starting in 2022. It would also eliminate cost-sharing for beneficiaries once they entered catastrophic coverage. A catastrophic threshold of $3100 would also be established.

Other changes to Medicare would include:

  • Requiring pharmacy benefit managers (PBMs) to disclose their negotiated discounts and rebates
  • Requiring drug manufacturers to submit information and documents to HHS justifying drug price hikes
  • Establishing a wholesale acquisition cost add-on payment of no more than plus 3% when the average sales price is unavailable for new drugs

“We’ve been working on a bipartisan basis for more than six months to craft legislation that begins to address the broken prescription drug supply chain. Pharmaceutical companies play a vital role in creating new and innovative medicines that save and improve quality of millions of American lives, but that doesn’t help Americans who can’t afford them,” said Grassley and Wyden in a joint statement.

They added, “This legislation shows that no industry is above accountability.”

Matt Eyles, president and chief executive officer of America’s Health Insurance Plans, issued a statement on the Medicare changes, saying, “Giving Big Pharma meaningful liability and accountability for their high drug prices is essential for keeping premiums low for seniors and reducing costs for taxpayers. It’s time to give drug makers some more skin in the game and eliminate the perverse incentives to set their prices high—and keep them high.”

However, the drug industry is opposing the bill. “The Senate Finance Committee package fails to meet the fundamental test of providing meaningful relief at the pharmacy counter for the vast majority of seniors," said Stephen J. Ubl, president and chief executive officer of the Pharmaceutical Research and Manufacturers of America, in a statement. "The legislation would siphon more than $150 billion from researching and developing new medicines while giving those savings to the government, insurers and PBMs—not seniors. For example, while the bill establishes an out-of-pocket cap, according to MedPAC it will only benefit 2% of Medicare patients. It also fails to ensure the deep discounts negotiated in the Medicare prescription drug program are passed along to patients in the form of lower out-of-pocket costs. And it replaces the market-based structure of Medicare Part D with Medicaid-style price controls that result in money going to the Federal treasury instead of seniors."

The bill’s Medicaid changes include allowing Medicaid to pay for gene therapies for rare diseases through new risk-sharing value-based agreements. With gene therapies coming with price tags of up to $2 million, the change will aim to increase access to these life-saving treatments for patients with limited options.

The bill would also raise the maximum rebate amount in Medicaid and ban spread pricing used by PBMs. CBO estimates these changes will save Medicaid $15 billion.

Savings will also have a spillover effects, resulting in savings for the commercial market, according to CBO estimates.