- Medicare would negotiate prices directly with drugmakers on 250 products that don't have competition from at least two generic, biosimilar or interchangeable biologics under a draft proposal from House Speaker Nancy Pelosi.
- A second proposal from the Democratic leader that finds common ground with the Trump administration would set the maximum price for any drug equal to an index of what foreign countries pay.
- Release of the draft plan comes as the full U.S. Senate prepares to debate its own drug pricing package, which would cap drug price increases and Medicare beneficiaries' exposure to out-of-pocket costs, along with limiting rebates. In addition, the White House Office of Management and Budget is reviewing the Trump "international pricing index" proposal.
The approach of the 2020 elections has focused Washington's collective mind on action to restrain drug prices. The Pelosi draft is the most far-reaching proposal so far, and embraces an idea that dates back to the dawn of the Medicare Part D drug benefit: direct negotiation of prices.
Rather than extensive negotiation across drugmakers' portfolios, however, the draft proposes direct negotiation on the 250 top-selling drugs used by Medicare beneficiaries that lack major price competition. The draft, which was first reported by Bloomberg Law, claims this would encompass nearly half of Medicare spending for pharmacy-dispensed drugs, which was $94 billion in 2017.
Of the 250, 150 would be selected from the universe of pharmacy-dispensed drugs covered by Part D of the program, and 100 from the physician-administered products covered by Part B.
The federal government would penalize manufacturers that don't participate or agree to a price at rate of 75% of the gross sales of the products for which no agreement was reached. The maximum price in these negotiations would be set at 1.2 times an index based on the prices paid by six other countries.
Despite a lack of negotiation outside the 250 specified in the draft, there is a backstop to prevent price escalation for others by setting inflation-based caps on any increases. Any increases above that would be paid back to the government in the form of rebates.
It's not clear how current the plan is, however. According to a senior Democratic aide quoted by The Hill, the document now available is out of date, and hasn't been distributed to the party's caucus yet. Pelosi's office did not return BioPharma Dive's request for comment.
Of the leading proposals in Washington, only Pelosi's includes direct price negotiation. However, some of her proposals bear some similarities by those championed by Republicans, including President Trump and Senate Finance Committee Chairman Chuck Grassley, R-Iowa.
Requiring rebates for price increases above inflation is shared with the plan voted out of the Senate Finance Committee in July, while setting prices relative to an international index is a concept embraced by Trump.
The difference between the Pelosi plan and the Trump's proposed rule is that the latter is restricted to physician administered drugs and would use a mechanism of contracted vendors using competitive bidding to control Medicare's drug expenditures, rather than a price cap.
Among the next steps for the proposal, if finalized and supported by House Democrats, would be committee hearings this month and a possible vote in the full House as early as October, Cowen analyst Rick Weissenstein wrote in a September 9 note to clients. The fate of the specific proposals would be down to negotiations with Senate and White House, and Republican control suggests that there would be resistance to direct Medicare negotiation.
"If [Pelosi] wants to enact legislation, it would almost certainly have to look like the Senate version rather than her measure," he wrote. "Including the drug pricing provisions in a larger bill will make it harder for House Democrats to vote against the package. However, Pelosi may decide that giving President Trump a 'win' on drug pricing is too steep a price to pay."
"The sheer ambitiousness of the proposals does make one wonder: was it intended to get something done, or was it intended to provide armor in an election year?" added Evercore ISI analyst Umer Raffat in a client note.