Drugmakers hiking prices above inflation rates would be required to pay money back to Medicare under bipartisan Senate legislation proposed Tuesday that would also reimburse physicians less for administering expensive intravenous drugs to beneficiaries.
The Senate Finance Committee's chairman, Chuck Grassley, R-Iowa, and senior Democrat, Ron Wyden, D-Ore., released the legislation ahead of a panel debate and vote scheduled for Thursday. The senators said the measures contained in the bill, taken together, would save beneficiaries $32 billion in out-of-pocket costs and premiums over 10 years.
Grassley and Wyden's work is one of several efforts moving on Capitol Hill and at the White House to address steep drug prices, a priority of President Donald Trump.
Potential legislative changes are newly in focus after the White House dropped efforts to ban certain rebates in Medicare and an administration plan to force drugmakers list prices in TV ads was defeated in court.
In the House of Representatives, a plan spearheaded by Speaker Nancy Pelosi, D-Calif., will likely be unveiled in September, a top healthcare adviser to the congresswoman said this week.
For biological drugs that must be administered via injection or infusion in physicians' offices or hospitals, the proposal from Senate Finance seeks to restrain reimbursement rates in several ways.
The bill proposes mandating rebates from drugmakers to Medicare for products with price increases in excess of inflation rates, as well as capping at $1,000 the "add-on" to the sales price collected by physicians, now set at 3% or 6%. Additionally, coupons provided to patients by drugmakers would be included among the discounts that the Centers for Medicare and Medicaid Services uses to calculate payment rates.
Such changes to Medicare Part B likely conflict with Trump administration plans to calculate reimbursement via an index linking payment to prices paid in certain foreign countries.
Grassley and Wyden's bill is "clearly worse" for drugmakers than current law, noted Cowen analyst Rick Weissenstein, but are "not as bad as the administration's international price index."
A share price jump for Regeneron, which would be heavily affected by the Trump plan, in late Tuesday afternoon trading seemed to confirm as much.
In addition to reimbursement restraints on branded drugs, the legislation would give healthcare providers an incentive to use biosimilars by increasing the physician add-on payment to 8% for the first five years after market introduction.
The Alliance for Affordable Medicine, which represents generic and biosimilar manufacturers, called the legislation "a step in the right direction" that would "address the misaligned incentives that are preventing Medicare's seniors from benefiting fully from the record-level number of FDA approvals of generic and biosimilar medicines."
Branded drugmaker trade group PhRMA critiqued several aspects of the bill and is likely fiercely lobbying to makes changes.
Still, the bill might represent "the best the industry can hope for," argued Bernstein analyst Ronny Gal in an investor note, "as this is a bipartisan effort in the more pro-industry Senate ahead of the election where the Democrats are broadly expected to make some gains."
Drugmakers to pay more
For drugs provided at a pharmacy, the bill alters the coverage design that created the so-called doughnut hole, a policy quirk that meant beneficiaries are exposed to $6,800 in out-of-pocket costs before catastrophic insurance kicks in.
Under the benefit laid out in the proposed bill, total costs for Part D beneficiaries between deductible and cost-sharing would be limited to $3,515.
Above that threshold, which kicks in when total drug costs reach $11,155, costs would be split, with manufacturers paying 20%, Part D plans paying 60% and Medicare reinsurance paying 20%.
PhRMA was critical of this particular provision. "While the bill establishes an out-of-pocket cap, according to [the Medicare Payment Advisory Commission] it will only benefit 2% of Medicare patients," Steve Ubl, the organization's president, said in a statement.
Lobby group America's Health Insurance Plans backs the proposal.
While the legislation targets price increases, biopharma companies selling drugs costing less than $17,000 a year could come out ahead because of the Part D coverage redesign. However, for expensive new products like oral cancer drugs it would likely be a negative.
As with physician administered drugs covered by Part B, the pharmacy-dispensed drugs covered by Part D would also be subject to a rebate to Medicare if their prices increased above inflation rates.
Ubl said this proposal "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."
While pharma supported the now-withdrawn Trump plan to recast drug rebates, the industry has fiercely resisted the administration's international price index, which PhRMA has also branded as price controls.