Senate Finance Committee Releases Updated Drug Pricing Bill and Extender Agreement

Recently, Senator Chuck Grassley and Senator Ron Wyden released an updated version of their drug pricing legislation, including extenders involving Medicare, Medicaid, and other public health programs. The updated legislation includes several changes to Medicare Part D, such as reducing beneficiary cost-sharing in the initial phase of the benefit, shifting drug manufacturer discounts, and creating a monthly out-of-pocket maximum.

The Proposed Legislation

Like many issues coming before Congress these days, parts of the comprehensive drug pricing measure are controversial, including inflationary caps. However, the agreement on “extenders” is in line with bipartisan priorities.

The Extenders

The multi-year extension of Medicare, Medicaid, and public health programs and policies, known as the “extenders,” include funding for the Puerto Rico Medicaid program and a delay of disproportionate-share hospital (DSH) payment cuts that are set to expire this month. The bill also reauthorizes the Patient-Centered Outcomes Research Institute (PCORI) and extends programs such as Temporary Assistance for Needy Families (TANF) and Maternal, Infant, and Early Childhood Home Visiting (MIECHV).

Medicare

• GPCI Floor: Extends the current work GPCI floor for three years through calendar year 2022.
• Low-Volume Hospital Payments: Makes the low-volume payment adjustments, as applied for fiscal year 2019, permanent.
• Medicare-Dependent Hospital Program: Makes the MDH program permanent.
• Quality Measure Development: In addition to carryover funding available from previous years, the bipartisan agreement provides $22 million for quality measure endorsement, input, and selection activities in fiscal year 2020, and $20 million in each of fiscal years 2021 and 2022. It also enhances transparency of the dollars spent through updated reporting requirements.
• Outreach and Assistance to Low-Income Programs: Extends the programs through fiscal year 2022.
• Independence at Home: Extends the Independence at Home Demonstration Program, which is currently set to end on December 31, 2020, for an additional three years.

Medicaid

• DSH: Address the scheduled disproportionate share hospital payment reductions for two years followed by Medicaid DSH payment reductions of $8 billion for each of fiscal year 2022 through 2025; includes reporting requirements on Medicaid non-DSH supplemental payments, Medicaid shortfall and third party payment improvements, and GAO study and report on uncompensated care costs.
• Excellence Act: Extends the Community Mental Health Services Demonstration Program for two years for the current states and adds eleven new states to the demonstration.
• Medicaid Funding for Territories: Extends and increases funding to the U.S. territories for four years; includes important program integrity improvements for Puerto Rico’s Medicaid program.
• Money Follows the Person: Permanent extension of the Money Follows the Person Rebalancing Demonstration with “important policy improvements.”
• Spousal Impoverishment: Permanent extension of Protection for Medicaid Recipients of Home and Community-Based Services Against Spousal Impoverishment with improved reporting requirements.
• Medicaid Secondary Payer: Allows states to implement cost-avoidance measures for certain Medicaid payments alongside improved beneficiary access reporting requirements.

Public Health Programs

• PCORI: Extends the PCOR Trust Fund, the health insurance fees, and an increased level of mandatory appropriations through fiscal year 2029; eliminates the transfers from the Federal Hospital Insurance Trust Fund, and makes policy changes relating to PCORI activities, governance, and oversight.
• TANF: Extends the Temporary Assistance for Needy Families (TANF) program for three years and requires reporting on outcomes, eliminates the separate two-parent work rate, requires states to report on spending on families with income over 200 percent of poverty, and clarifies a purpose of TANF is to reduce child poverty.
• MIECHV: Extends the Maternal, Infant, and Early Childhood Home Visiting (MIECHV) program through fiscal year 2024.
• Child Welfare: Addresses the expiration of child welfare demonstration projects by including the Family First Transition Act to help states with waivers that ended October 1 and to support implementation of the Family First Prevention Services Act.
• SRAE: Extends the Sexual Risk Avoidance Education (SRAE) program for three years.
• PREP: Extends the Personal Responsibility Education Program (PREP) program for three years.
• HPOG: Extends the Health Professions Opportunity Grants (HPOG) program for three years.

Drug Pricing Provisions

Some of the important updates to the drug pricing provisions in the Committee’s legislation include reducing Part D cost-sharing and manufacturer discounts in Part D.

Reducing Part D Cost-Sharing

The proposed legislation would reduce the amount of spending that Medicare beneficiaries are responsible for during the initial phase of the Part D benefit (from 25 percent down to 20 percent), lowering costs for beneficiaries who have expenses above their deductible.

Manufacturer Discounts in Part D

The bill also would require drug companies to provide a new discount of 7 percent on brand-name drugs in the initial phase of the Part D benefit, while scaling back their proposal in the catastrophic phase to a mandatory discount of 14 percent (down from 20 percent).

‘Patient Smoothing’ in Part D

The proposal requires insurers to offer a cap on the amount of out-pocket-costs that a beneficiary has to pay in any one month, suggesting that “spreading high out-of-pocket costs over multiple months protects against the burden of a significant one-time expense.”

House Legislation

In late 2019, the House of Representatives approved drug pricing legislation pushed through by Speaker Nancy Pelosi, which would allow the United States government to negotiate lower prices for certain drugs. It’s unlikely that this bill will be taken up in the Senate.

What’s Next?

It seems unlikely that this bill will get any traction before the end of the year. While it generally enjoys bipartisan support, there seems to be some uncertainty and disagreement among Senate republicans, perhaps due to the Senate Majority Leader Mitch McConnell. According to Senator Grassley, more Senate Republicans do not outwardly support the bill because McConnell “asked them not to.” Senator Grassley released his frustration during a press conference, saying, “The president wants it!” Further added to the frustration is that many Senate Democrats also support the measure.

McConnell released a report where he noted that the Senate’s path forward on drug costs is “under discussion” and he is “looking to do something on drug pricing.”