Senate Majority Leader Chuck Schumer (D-N.Y.) announced Tuesday that Democrats have finally agreed on a plan to reduce the price of prescription drugs, potentially settling one of the biggest unresolved issues preventing passage of their Build Back Better legislation.
“I’m pleased to announce that an agreement has been reached to lower prescription drug prices for seniors and families in the Build Back Better legislation,” Schumer said at a news conference. He added that the proposal received approval from a key holdout, Sen. Kyrsten Sinema (D-Ariz.), who subsequently released a statement confirming her support.
In that statement, Sinema cited negotiations she held with House Speaker Nancy Pelosi (D-Calif.), while also thanking Reps. Scott Peters (D-Calif.) and Kurt Schrader (D-Ore.) for the help. Pelosi had been pushing hard for a deal on prescription drugs; Peters and Schrader, like Sinema, had been resisting. If all of them are on board, then the deal most likely can pass the House as well.
Under the agreement, according to a summary that Democratic leadership circulated on Tuesday evening, the federal government would have power to regulate the prices of a small group of drugs, drawing from both Medicare Part B (the part of the program that covers drugs delivered in clinics, hospitals and other outpatient settings) and Part D (the part of the program that covers medications seniors buy and administer on their own, through pharmacies).
Another key feature of the plan are “inflation caps” ― basically, a limit on how much companies can raise prices year after year. The inflation caps would take effect next year, while the negotiation process would start with no more than 10 drugs for 2025 and increase to no more than 20 drugs starting in 2028.
The agreement also calls for redesigning the Part D benefit, in order to limit out-of-pocket costs for seniors at $2,000 a year, and it would restrict the price of insulin to no more than $35 per month, Schumer said.
Details And Impact Not Yet Clear
The impact of the plan on what individuals, employers and the government pay for drugs is not yet clear ― and won’t be until full details are available and analysts have time to go through them, line by line. But nobody thinks the plan will regulate prices as aggressively, or deliver as much in savings, as advocates once hoped.
The original vision for this initiative was to model legislation on a 2019 bill under which the federal government would negotiate for at least 50 drugs a year, using a formula based on what countries overseas pay, with few restrictions on the kinds of drugs subject to negotiation. That plan also envisioned inflation caps that would deliver immediate, significant savings.
Together with a redesign of the Medicare Part D benefits, these provisions promised relief to millions of Americans who struggle with medication costs ― in the worst of cases, skipping doses in order to save money and then suffering more serious medical problems as a result.
The idea of such reforms is wildly popular, polls have shown repeatedly. And it has broad support in the Democratic Party ― from President Joe Biden, congressional leaders and most of their members.
But the proposal ran into vocal opposition from a small group of Democrats, numbering less than a dozen in the two houses combined; Sinema, Peters and Schrader were prominent among them. These Democrats, all of whom the drug industry had supported with campaign contributions, argued that aggressive attempts to control drug prices would make it harder for them to raise investment capital, threatening innovation.
Biden and Democratic leaders promised to increase investment in basic scientific research and support for small biotech startups that most of the innovating today. But that wasn’t enough to win over the holdouts, so they began discussing compromises that would scale back initiative’s reach.
One of the biggest concessions exempts drugs from negotiations during their first years on the market, including the period when they have “exclusivity” status from the U.S. Food and Drug Administration that prohibits other manufacturers from producing generic alternatives.
For “biologics,” the complex treatments derived from living systems that treat conditions such as cancer, that exemption from negotiations would last for 12 years. For simpler, “small molecule” drugs, the exemption would last for nine years.
But even with the concessions, the program should deliver tangible savings to many Americans, especially seniors who will benefit from the more generous coverage they’ll be getting from Medicare Part D.
“While there’s been a lot of focus on the negotiations and the inflation provisions, it is hard to overstate how helpful the out-of-pocket limit will be for people on Medicare with serious medical conditions who take really expensive drugs,” Tricia Neuman, senior vice president at the Henry J. Kaiser Family Foundation, told HuffPost. “For them, it is an unambiguous win.”
Advocates For Aggressive Reform Praise The Compromise
At the Tuesday press conference, Sen. Amy Klobuchar (D-Minn.) mentioned that one key piece of the deal ― an enforcement mechanism to make sure drug companies accept negotiated prices ― was still “being written.”
The original idea was to slap a punishing excise tax on drug companies that refused to negotiate over prices or accept the inflation caps. That too ran into opposition from the drug industry and its allies. The excise tax remains part of the final plan, according to the summary documents, but several sources privy to internal discussions said Democrats were still debating its parameters.
Klobuchar, who was among those working the past few days for an agreement with stronger government negotiation, touted the benefits of the bill even as she acknowledged it was not everything advocates like her wanted.
Senate Finance Chairman Ron Wyden (D-Ore.), also a longtime proponent of regulating drug prices, predicted that the inflation caps in particular would make an impression on the public.
“What we’re coming out of the gate on in 2023 is negotiating over the most expensive drugs, cancer, arthritis, anti-coagulants,” Wyden said. “I think the people are going to pay, you know, the most attention to price gouging penalties for that can be felt in 2022.”
Also among those hailing the deal on Tuesday was AARP.
“Allowing Medicare to finally negotiate drug prices is a big win for seniors,” Jo Ann Jenkins, the organization’s CEO, said in a prepared statement. “Preventing prices from rising faster than inflation and adding a hard out-of-pocket cap to Part D will provide real relief for seniors with the highest drug costs.”
Other advocates offered more tempered praise, although they expressed satisfaction at getting even a heavily compromised reform past the drug lobby.
“The deal ... has good provisions that will help people, but its limits were literally written by the industry the proposal is designed to regulate,” Alex Lawson, executive director of Social Security Works, told HuffPost. “Pharma money continues to corrupt D.C., but this deal shows that pharma is not invincible.”
As if to prove the point, Stephen Ubl, president of Pharmaceutical Research and Manufacturers of America (PhRMA), condemned the agreement.
“If passed, it will upend the same innovative ecosystem that brought us life-saving vaccines and therapies to combat COVID-19,” Ubl said in a statement that PhRMA distributed Tuesday evening. “Under the guise of ‘negotiation,’ it gives the government the power to dictate how much a medicine is worth and leaves many patients facing a future with less access to medicines and fewer new treatments.”
CORRECTION: This article has been corrected to reflect that the cap on insulin costs is $35 per month.