Recently, the House Health, Employment, Labor and Pensions (“HELP”) Subcommittee held a hearing to consider testimony and discuss policy solutions in response to Speaker Pelosi’s recently released bill, entitled the Lower Drug Costs Now Act, which is intended to rein-in prescription drug pricing.
The bill contains a number of provisions, including –
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- Ending the ban on Medicare negotiating directly with drug companies.
- Making these lower negotiated prices available to all Americans.
- Tying drug prices to the lower prices paid in other countries.
- Creating a $2,000 out-of-pocket limit on prescription drug costs for Medicare beneficiaries.
- Reinvesting in innovation and the search for new cures and treatments.
We recently discussed some of these provisions in reference to a draft summary that was making the rounds on Capitol Hill prior to the bill’s formal release. Recently, the HELP Subcommittee convened witnesses from several patient groups, as well as public health policy stakeholders to discuss the proposals. While many were supportive of the drug price lowering provisions, others cautioned of unintended consequences, including de-incentivizing innovation.
Frederick Jassi, Executive Director of Families USA which represents health care consumers, noted that the Act would “significantly improve the affordability of prescription drugs for consumers, and produce substantial savings in the Medicare Programs.” Jassi also provided several suggestions to expand the provisions, including protecting, not just Medicare beneficiaries, but all consumers from price spikes, and requiring that uninsured consumers can purchase drugs at Medicare-negotiated prices. Dr. Mariana Socal, Assistant Professor at Johns Hopkins University Bloomberg School of Public Health, provided comments that touted the international benchmarking and Medicare negotiation aspects of the bill. Socal also commented on post market entry drug price spikes, noting “[d]rug manufacturers set the drug’s launch price to allow them to recoup their research and development investments during the drug’s monopoly period, [so] [p]rice changes that occur after a drug has launched are unlikely to be related to the need to recoup R&D investment.”
However, other witnesses were critical of the Act’s potential to negatively impact innovation. For instance, Dr. Craig Garthwaite, Associate Professor at Northwestern University School of Management, focused on the economic aspects of the Act, and noted that “it is critical to balance the oft-discussed need for access to existing products with the less-discussed lack of access from the absence of effective treatments.” Garthwaite was critical of the price negotiation provision, saying that firms that don’t comply with the terms of the negotiation “would initially face a penalty equal to 65 percent of the drug’s gross sales,” and would rise each quarter thereafter. Therefore, “[f]rom an economic standpoint, this is a price control not a negotiation.” Garthwaite added that “[p]rice controls of the degree proposed in the legislation would have meaningful consequences on future innovation and therefore must be debated in an intellectually honest manner.”
It is hard to predict what will happen to Speaker Pelosi’s bill going forward, as progressives are attempting to add provisions, and this bill puts bipartisan drug price efforts at risk, but given the amount of discussion and proposed legislation coming out of Capitol Hill lately, it seems that the biopharmaceutical industry will have to grapple with the drug pricing issue for the foreseeable future.