House Passes Bill to Lower Drug Prices

December 18, 2019

On Dec. 12, the House passed H.R. 3, the Elijah E. Cummings Lower Drug Costs Now Act, by a vote of 230-192. The bill would grant the Health and Human Services (HHS) Secretary the authority to negotiate prescription drug prices and caps yearly out-of-pocket costs through Medicare Part D in an effort to drive down the high costs of prescription drugs. No Democrats voted against the bill, while two Republicans crossed party lines to vote for it.

The centerpiece of the bill is a provision that would require the HHS secretary to negotiate prices for up to 250 high-spend drugs with little competition. The negotiations would be bounded by an index of drug prices in other developed countries. Negotiated prices would have to be offered under Medicare and Medicare Advantage, and could be offered under private health insurance unless the insurer opts out.

The price-negotiation provisions would lower spending by about $456 billion over 10 years, according to an analysis released by the nonpartisan Congressional Budget Office (CBO), and the bill would increase revenues by about $46 billion over the same period. Expanding Medicare, a federal insurance program for seniors and people with disabilities, to include dental, vision and hearing coverage would raise spending by approximately $358 billion. In addition, the bill provides $10 billion to battle opioid addiction and well as investments in innovation at the National Institutes of Health.

Other provisions included in the bill would cap seniors’ out-of-pocket costs in Medicare Part D at $2,000 per year and would make drug makers pay back Medicare, and potentially private payers, for increasing prices at a rate higher than inflation. The CBO estimated that the inflationary rebates would save the federal government $36 billion over 10 years. The Part D redesign, however, would cost more than $9 billion.

A last-minute deal hammered out with Reps. Pramila Jayapal (D-Wash.) and Mark Pocan (D-Wis.), who head the Congressional Progressive Caucus, added a feasibility study to extend rebates for drug prices that increase faster than inflation to employer-sponsored coverage.

Lawmakers added several amendments on the House floor, including one that would provide grant funding for HHS to pay start-up costs for hospitals in rural and underserved areas to create graduate medical education programs. Another would establish a grant program for states to reduce the burden of administrative work in healthcare and call for HHS to reduce administrative costs by 50 percent over a decade.

H.R. 3 as passed by the House is unlikely to become law. Senate Majority Leader Mitch McConnell (R-Ky.), has already stated that he does not intend to take up the bill when it reaches his chamber. Republicans have charged that H.R. 3 would lead to fewer drugs reaching the market. Republicans have pointed to an estimate by the nonpartisan Congressional Budget Office (CBO) that found the legislation could lead to 10 fewer drugs reaching the market because of less revenue. The White House, for is part, announced on December 10 that the president would veto the measure if it came to his desk in its current form.

Meanwhile, the Senate Finance Committee approved its own prescription drug pricing legislation – the Prescription Drug Pricing Reduction Act of 2019 (S. 2543) – in July, and Finance Committee Chairman Charles Grassley (R-Iowa), and Ranking Member Ron Wyden (D-Ore.) released an updated version of that proposal on December 6. That measure proposes, among other things, to lower prescription drug costs though nontax changes to Medicare and Medicaid rules and improve transparency related to pharmaceutical pricing and transactions. While, Senator Grassley’s bill was able to get through the Senate Finance Committee, Leader McConnell has yet to bring up the legislation for a vote on the Senate floor.