US House Speaker Nancy Pelosi on Thursday unveiled proposed legislation that would permit the federal government to negotiate prices of drugs for Medicare and other health programs. Specifically, the proposal would empower the Department of Health and Human Services (HHS) to annually negotiate the prices of at least 25 of the most expensive drugs lacking generic alternatives and as many as 250 other medicines, including insulin, and apply those discounts to Medicare enrollees as well as private health plans across the US.
It would also create an international pricing index linking drug prices to those in other countries, similar to a proposal introduced by the Trump administration last October. The index would set an upper limit for negotiated prices of 120% of the volume-weighted average paid in Australia, Canada, France, Germany, Japan and the UK.
In addition, the legislation would penalize companies that refuse to negotiate or fail to reach an agreement, starting with a “non-compliance fee” of 65% of gross sales of the drug in question and increasing by 10% in each subsequent quarter without an agreement, up to a maximum of 95%.
The plan also calls for forcing drugmakers to pay rebates if they raise prices more than the inflation rate, and for implementing a $2000 cap on out-of-pocket expenses for beneficiaries in Medicare Part D drug plans. Further, it calls for reducing the amount the federal government pays in Part D and increasing the costs borne by insurers and drug manufacturers.
Stephen Ubl, chief executive of the Pharmaceutical Research and Manufacturers of America (PhRMA), called Pelosi’s proposal a “radical plan” that would give the federal government “unprecedented, sweeping authority” to fix drug prices in public and private markets, while importing price controls from other countries. “We do not need to blow up the current system to make medicines more affordable,” he said, adding that policymakers should instead consider “practical policy solutions such as sharing negotiated savings with patients at the pharmacy counter, lowering coinsurance in Medicare Part D, increasing transparency on patients’ costs, promoting value-based contracts, among other improvements to the system.”
Meanwhile, Jim Greenwood, CEO of the Biotechnology Innovation Organization (BIO), said the proposal “abandons any pretense of allowing a free and fair market system to determine the value of prescription medicines.”
In July, HHS outlined ways for the US to import less expensive prescription drugs from Canada and other countries in a bid to lower drug costs. Meanwhile, President Donald Trump has announced plans for an executive order that would require the US to pay no more for prescription drugs than the country with the lowest prices.