The first details of the long-awaited House Democrat plan to lower drug prices leaked out Monday night, with elements that have long been anathema to the biopharma industry and its supporters in Washington.
While the world digested the details Tuesday, however, biopharma investors didn’t seem fazed. Some individual companies saw shares dip, but the biopharma indices of the Nasdaq and New York Stock Exchange were both up slightly at Tuesday’s close. Full details of the proposal could come this week, according to the Washington Post.
In current form the House bill “stands no chance of passing the Senate,” wrote SVB Leerink analyst Geoffrey Porges in a note to investors Tuesday morning. “While the plan would be alarming for biopharma’s profitability and even viability if implemented, it smacks of attempted intimidation, or at least political negotiations, rather than being a serious legislative document, in our view.”
The progressive consumer advocacy group Public Citizen issued an endorsement with caveats and noted that the plan is still a work in progress. “The plan as articulated does not restrain how much we pay for newly launched drugs, and patients who use expensive medicines that do not qualify for negotiation may still be at the mercy of pharma’s price gouging,” Peter Maybarduk, director of Public Citizen’s Access to Medicines Program, said in a statement.
For years public opinion has held a dim view of the drug industry, but only in recent years have drug prices become a political target. The annual Gallup poll of industry reputation has pharma sinking to the bottom of the list this year. “Over the past 19 years, few industries have been rated lower than the pharmaceutical industry’s current -31 net rating,” a Gallup release stated last week. “These include the federal government and the oil and gas, real estate, and automobile industries.”
The Democrats’ bill, spearheaded by House Speaker Nancy Pelosi, has been in the works since at least late spring and has several ambitious components. It allows the US Health and Human Services secretary, who oversees the Medicare and Medicaid programs, to negotiate prices directly for the 250 drugs that represent the highest costs, a list that is heavy with insulin and cancer drugs. Unlike previous calls to let Medicare, the world’s biggest drug-buying entity, use its massive leverage to negotiate better prices—as a candidate and president-elect Donald Trump talked up Medicare’s purchasing power—the Democrats’ plan would make the HHS negotiated price available to all insurers. (Payers could choose to use the government price or try to negotiate something better, according to details leaked to media outlets Monday night.)
Drug makers who refuse to negotiate with Medicare would face a penalty of 75 percent of the previous year’s gross sales of the drug in question, a sum that would reach into the billions of dollars for several products.
The Pelosi-led plan would also cap prices based on an international index of prices set by six countries, which echoes a Trump administration proposal that hasn’t gotten much traction in the face of consistent industry criticism.
But there’s a twist: The US negotiated price would have to be set below the international index price and could not increase faster than inflation. The plan also has a retroactive component. Drug makers would have to either roll back prices to 2016 levels or pay the government the difference.
In the Senate, a bipartisan bill, sponsored by Chuck Grassley (R-IA) and Ron Wyden (D-OR), aims to reduce out-of-pocket drug costs for seniors and carries penalties for price hikes that outpace inflation. It passed the Senate finance committee 19-9 in July but has yet to reach a full vote.
The Pelosi-led plan comes more than two years into Trump’s tenure. Until last year, the administration addressed public discontent over high drug prices mainly through the president’s rhetoric, occasionally bashing drug companies but doing little else. The administration’s “blueprint” emerged in May 2018, with other ideas—such as the international price index—rolled out in subsequent months. This summer, two administration proposals were stymied. A court ruled that the White House could not force drug companies to include prices in television ads. And Trump himself shot down a proposal to end secret rebates that drug companies negotiate with insurers and their representatives.
Photo by Gage Skidmore via Creative Commons 2.0.