Pharma stock prices took an across-the-board tumble Tuesday after Speaker of the House Nancy Pelosi unveiled a working plan to lower the prices of 250 of the most expensive drugs covered by Medicare and other government-funded programs.
In some ways, the plan introduced by Pelosi, which is still a work in progress, according to reports, mirrors proposals put forth by the White House, including providing the government the authority to negotiate directly with drugmakers – something it is currently prohibited from doing. As Politico noted, the Pelosi plan would peg the 250 drugs, including insulin, to the International Price Index, which would set specific drug prices based on an international benchmark. A similar idea was floated by the Department of Health and Human Services earlier this year. In its argument, HHS said Medicare Part B drug costs are 1.8 times higher than an international average of countries. In July, President Donald Trump proposed a “favored nations clause” which essentially ties drugs paid for by government programs to the prices paid for by other governments. That followed the 2018 proposal of a price-negotiation plan for Medicare-supported infused and injected drugs that the administration claimed could save $17 billion over five years.
In addition to granting the government the power to directly negotiate with the drug industry, the Pelosi plan would “apply the negotiated drug prices to the private insurance market,” Politico reported. That idea provides significant teeth that many progressive organizations have called for over the past few years. Full details of the plan are not expected until later this month.
While the Pelosi proposal is still a work-in-progress, the plan seems to be to have some kind of legislation ready to introduce ahead of the 2020 elections. While lawmakers from both sides of the aisle have called for some kind of action to lower prices for Americans, the Pelosi plan could cause a rift among Republicans, some of whom are opposed to attaching drug prices to the IPI. PhRMA, a powerful drug lobbying agency, is also opposed to the measure. Following the revelations of the Pelosi proposal, PhRMA came out against the plan.
“The House Democrat plan would end the current market-based system that has made the U.S. the global leader in developing innovative, life-saving treatments and cures,” CEO Stephen Ubl said in a statement, according to Politico.
BIO’s Jim Greenwood also decried the idea of tying prices to the IPI. During a talk in California last month, Greenwood said if the U.S. went to the pricing index model, it would only cause other countries to lower their own drug prices, since they use the U.S. as a point of reference for pricing. That would, in turn, trigger the government-controlled pricing to drop even further and likely stymie significant research and development across the industry.
PhRMA, among other groups, including BIO, has been opposed to the idea of tying prices to the IPI since it began to be floated earlier this year. Recently, the U.S. Chamber of Commerce conducted a study into the possible negative impacts of the IPI. The study predicted dire consequences that could limit options for many patients, including cancer patients. Additionally, the Chamber of Commerce’s study found that it could cause the biopharmaceutical industry to have a major drop in revenue that would “significantly impact” research-and-development funds on average of 25%.