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Situational awareness: Congress’ drug pricing push is really going in pharma’s favor

If you asked me in January whether Congress would stick it to pharma this Congress, I’d say the odds were pretty darn good. Now I’m not only doubting Congress will inflict any pain on the industry, I’m starting to think the so-called reforms both Republicans and Democrats are pushing may leave the industry better off than when Congress gaveled in this January.

Hear me out: One of the big ideas Congress is talking about in earnest right now is capping what seniors can pay out of pocket each year at the pharmacy counter through Medicare Part D. (Need more of a policy primer on that? Keep reading, we’ve got a go-to guide this week on where things are in each congressional committee and which policies lawmakers are considering.)


The idea will surely help seniors who have sky-high drug bills, but drug makers have long supported the idea. As PhRMA put it in its official response to the House’s proposal: “We are heartened that the Committees included an out-of-pocket cap in their discussion draft, which would give seniors the same protection that those with commercial coverage now have.” Call me cynical, but any time the industry you’re trying to reform is “heartened” by your proposal, that should probably raise eyebrows …

So why is PhRMA supporting this?

First, lobbyists tell me it could take the steam out of much more punitive drug pricing ideas that take on drug makers directly, like a proposal to have Medicare negotiate prices or the Trump administration’s idea of pegging certain drug prices to what other countries pay. As one lobbyist put it: That idea could “hopefully take the wind out of the sails for drug negotiation.”


Second, PhRMA’s clearly hoping that it can use the policy change to actually reverse a huge legislative loss from last year, when drug makers were stuck with a bigger chunk of Medicare drug costs in what they call the “coverage gap” or the “donut hole.” They want insurers, or plans, to be liable for more of those costs.

“Any simplification of the Part D benefit should also seek to address the current low level of plan liability in the coverage gap. The Bipartisan Budget Act passed by Congress in February 2018 reduced plan liability in the coverage gap from 25 percent to just 5 percent for brand medicines,” PhRMA wrote in a recent comment to Congress.

Lobbyists were surprisingly candid with me that the drug industry sees this change as a way to relitigate last year’s changes, or as one lobbyist put it: “get rid of that whole donut hole debacle.”

Lobbyists keep talking about a plan from the American Action Forum that would eliminate the so-called coverage gap entirely (the portion of Medicare where drug makers pick up most of the bill that was the focus of last year’s legislative battle). It would then restructure the so-called catastrophic phase so that drug makers pay 9% of drug costs, Medicare picks up 20% and insurers would be stuck with the remaining 71%. (Lobbyists tell me, however, that there’s no consensus among drug makers as to whether that 9% number should be dialed up or down.)

AAF says that under its plan drug makers would owe $1.6 billion less to the government than under current law. Not too shabby for an industry that just a few months ago seemed to be bracing for some serious reforms …

Following publication of this article, Tara O’Neill Hayes, deputy director of health care policy at AAF, clarified that AAF’s $1.6 billion projection was based on an assumption that drug makers would also lower their list prices. 

“It’s not intended to be a win for them,” O’Neill Hayes said. “In fact, the 9% rate was specifically chosen because it was seen as the rate at which pharma would be neutral.”

So where exactly do things stand right now?

If your head is starting to spin about the various drug pricing bills floating around on Capitol Hill, you’re not alone. Here’s what we know so far about the packages emerging from Congress’ powerful health care committees, and when such packages could eventually get to the president’s desk:

Senate Finance: The committee is currently in the throes of negotiating a package of drug pricing reforms. The committee’s chairman, Sen. Chuck Grassley (R-Iowa), was remarkably candid at an event last week on what he wants to see come out of his committee. Chief among the ideas: capping the amount Medicare beneficiaries pay at the pharmacy counter, reforming how doctors are paid for certain drugs administered in their offices, and even potentially extending Trump’s plan for eliminating drug rebates to the commercial market. (For more, STAT’s Ruth Hailu has a great rundown of Grassley’s Q&A.)

On timing, lobbyists have long expected a markup on June 19, but they’re increasingly doubtful the committee will make that deadline. (A committee spokesman told me a bill will likely be introduced “within the next month, but a date hasn’t yet been set in stone.”) Among the sticking points: Negotiations are still ongoing, especially when it comes to exactly who pays for capping what seniors pay at the pharmacy counter.

Senate HELP: The committee released a surprisingly sweeping discussion draft in late May. It includes PBM reforms like banning spread pricing as well as changes to the FDA’s exclusivity rules. The committee’s chairman, Lamar Alexander (R-Tenn.), has also promised to work to include bills that would tie what patients pay out of pocket to the negotiated price for a drug rather than its list price, as well as a proposal that would require more disclosures from drug companies. Lobbyists told me they expected a hearing on that bill on June 18.

House Energy & Commerce and House Ways & Means: The House committees worked together to release a draft proposal last month that, like the yet-to-be-released Senate Finance proposal, would cap what Medicare beneficiaries pay out of pocket for drugs. The draft was surprisingly vague (only four pages), and the committee is still hammering out key details, like how drug costs should be split between the government, drug makers, and insurers. Comments on the draft were due Thursday. The committees have been mum about next steps.

House leadership: Rumors were flying that House Speaker Nancy Pelosi and her health policy guru Wendell Primus would release a concrete drug pricing proposal last week, but no dice. The latest rumor I’ve heard is that there could be a white paper out this week on that proposal, as the details continue to be hammered out by committee staff. But a Pelosi spokesperson threw water on that late Monday, telling me there would be “nothing this week.”

When might we see something on the president’s desk?

I’ll eat crow if we have a serious drug pricing package to the president before the end of September. It’s becoming clearer and clearer that Congress’ self-imposed deadlines are already slipping, and lawmakers are still at the early stages of stitching together this plan. (Remember, multiple bills are still discussion drafts, which still have to be formally introduced, marked up, and passed on the floor … and then comes the process of reconciling the House and Senate bills into one coherent package.)

But don’t just take my word for it. As one drug industry lobbyist put it: “The timelines that committee leaders in both chambers are espousing are ridiculous. I don’t see them finished in their work in either chamber before August recess. I think more is still unknown than known at this point.”