WASHINGTON (Reuters) – U.S. House Speaker Nancy Pelosi released proposed legislation on Thursday that would allow the federal government to negotiate the prices of hundreds of prescription drugs for Medicare healthcare beneficiaries as well as other consumers.
Americans pay the highest prices for prescription drugs in the world, as most other developed nations have single-payer systems with the government negotiating prices for its people.
Democrats promised to curb prescription drug prices during last year’s congressional election campaign, when they won the majority in the House of Representatives. U.S. President Donald Trump has also promised to lower prices but has been struggling to deliver on that before the November 2020 election.
But many of Trump’s fellow Republicans, who run the Senate, are not keen on letting the government negotiate over prices, saying it amounts to price fixing. Elements of Pelosi’s plan are also opposed by the pharmaceutical industry.
Pelosi’s proposal would allow the U.S. government every year to negotiate prices on “as many as possible of the 250 most costly drugs to Medicare and the entire U.S. health system” that lack price competition, a summary of the bill said.
In the first year alone, drugs representing more than half of all Medicare “Part D” drug spending would be subject to the negotiation process, including insulin, it said.
“To deliver maximum savings for the greatest number of Americans, the price determined by the negotiations process would be available to all purchasers – not just Medicare beneficiaries,” the summary said.
The U.S. government in 2016 spent around $29 billion on prescription drugs in Medicare’s Part B, which includes most injectable drugs, and nearly $100 billion in Part D, which covers pills and other drugs usually dispensed in pharmacies.
The Speaker’s bill would also impose penalties on pharmaceutical companies that refuse to negotiate or do not reach agreement. They would have to pay a “non-compliance fee starting at 65 percent of the gross sales of the drug in question,” the summary said. This would increase by 10% every quarter up to a maximum of 95%.
The plan also calls for the government to use a global pricing index, that would set an upper limit for prices reached in negotiations as no more than 120% of the volume-weighted average of the prices paid in six other countries.
Those countries are Australia, Canada, France, Germany, Japan and the United Kingdom.
The price index provision could be aimed at soliciting White House support, since the Trump administration has said it is working on a similar rule on some Medicare drug prices.
Other developed nations typically pay far less for drugs, which Trump has called “global freeloading.”
Pelosi’s plan also calls for Medicare drugs to face a new inflation rebate.
If a drug company has raised the price of a Medicare drug above the rate of inflation since 2016, “they can either lower the price or be required to pay the entire price above inflation in a rebate back to the Treasury,” the summary said.
The proposal caps annual out-of-pocket spending on prescription drugs at $2,000 for Medicare Part D beneficiaries, the summary said.
It is not clear how much support Pelosi’s proposal, or any other drug pricing measure proposed in Congress, will receive ahead of next year’s presidential elections. But the cost of U.S. healthcare is sure to be a top campaign issue.
International price referencing is likely to face legal challenges from pharmaceutical companies, drug executives say. Merck & Co Chief Executive Kenneth Frazier said in June that Trump’s proposal to base some Medicare drug prices on lower prices paid in other countries was the administration’s most concerning drug-pricing proposal, and would face legal challenges if adopted.
Frazier said he believes that importing price controls from other countries would stifle innovation and restrict patient access to medicines in the United States.
Drug companies have long held that the prices paid for their drugs are proprietary. Even if the government is able to collect the data, calculating and putting new prices in place could prove to be a very difficult task.
Reporting by Susan Cornwell, additional reporting by Michael Erman; Editing by Himani Sarkar