Conference Coverage

Expect some congressional action on drug prices, but not major reform



– Congress is considering two separate, comprehensive proposals to address the escalating cost of drug prices, but neither is expected to make it to the President’s desk.

The more likely scenario is that parts of these bills aimed at reforming the Medicare Part D prescription drug program could be added on to a must-pass budget bill before the end of 2019, according to Ross Margulies, senior associate in the Washington office of the law firm Foley Hoag.

A bill championed by House Speaker Nancy Pelosi (D-Calif.), H.R. 3, is considered dead on arrival in the Senate since Senate Majority Leader Mitch McConnell (R-Ky.) has stated that the upper chamber will not take it up, Mr. Margulies said at the annual meeting of the Academy of Managed Care Pharmacy.

Despite this, the House is expected to move on H.R. 3 in mid-November. The bill has gone through three committee markups, and each have amended its language. The final bill language has not been released yet.

Meanwhile in the Senate, the Prescription Drug Pricing Reduction Act (S. 2543) enjoys some bipartisan support, but Mr. Margulies questioned whether there was enough to pass it.

But there are some provisions in both pieces of legislation that have bipartisan support and could ultimately be passed though other legislative vehicles, he said.

One proposal that is common to both bills is a cap on out-of-pocket spending by Part D beneficiaries, though the bills differ on how high to set the cap. The House bill caps annual beneficiary spending at $2,000, while the Senate proposal caps it at $3,600.

The lack of a cap “has increasingly raised some issues over the years as we have seen more and more specialty drugs come on the market that push individuals into the catastrophic phase in that first or second phase of that first or second refill,” Mr. Margulies said.

Another area that is garnering bipartisan support is reforming the structure of Medicare Part D.

Mr. Margulies noted that generally the Part D program has enjoyed bipartisan and consumer support and there “hasn’t been a major restructuring of the Part D benefit since its creation more than a decade ago.”

“I really think this is an area where Congress is in a bipartisan way very focused,” he added.

The redesign proposals in the two bills would fundamentally change how the catastrophic phase is covered. The out-of-pocket limits would eliminate beneficiary cost sharing in this phase, currently set at 5% of list price with no cap on spending, and dramatically reduce the government’s financial exposure during this phase.

Currently, the federal government covers 80% of the cost of drugs for beneficiaries in catastrophic coverage, and the plan sponsors cover the remaining 15%. The House and Senate plans both reduce government coverage to 20%. Under the House proposal, drug plans would be responsible for 50% while manufacturers would cover the remaining 30%. The Senate bill proposes a split of 60% for plans and 20% for manufacturers.

“Under either of these proposals, manufacturers with the highest-priced specialty drugs are probably going to fare the worst because you have that new open-ended liability in the catastrophic phase,” Mr. Margulies said.

On the plan side, “plans will face increased pressure to control costs/utilization,” he added.

These proposals could encourage manufacturers to reduce list prices and drug plans to more aggressively negotiate rebates and discounts.

One element of H.R. 3 that is not a part of the Senate bill is the requirement that the secretary of the Department of Health & Human Services negotiate drug prices for a certain number of high-cost drugs each year. Those negotiations would be backstopped by an international pricing index, with the aim of bringing the prices paid in the United States much closer to the lower prices paid internationally.

H.R. 3 also includes a hefty excise tax for manufacturers who either don’t participate in the negotiations or fail to offer price reductions that are within a specified percentage of the international pricing index.

Mr. Margulies noted that Speaker Pelosi was hoping to get White House endorsement on the drug negotiation provision, since it is similar to regulations proposed by HHS earlier this year, but impeachment proceedings have derailed any chance of getting that endorsement.

Mr. Margulies made no financial disclosures related to his presentation.

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