1 (888) 402-3465

Our Take: Bipartisan bill to lower drug prices clears Senate committee

Jul 29, 2019

On Thursday, the Senate Finance Committee voted 19-9 to advance a bill proposed by Sens. Chuck Grassley, R-Iowa, and Ron Wyden, D-Ore., that includes numerous provisions to lower drug prices.

The bill, called the Prescription Drug Pricing Reduction Act (PDPRA) of 2019, is likely to undergo considerable changes before it reaches the Senate floor for a full vote — if it gets that far. Sen. Wyden said Democrats would oppose a floor vote on the bill unless Republicans agree to hold votes on amendments that would guarantee insurance protections for people with preexisting conditions and give federal health officials the ability to negotiate Medicare drug prices directly with manufacturers. Even among the committee members who voted to advance the bill, there was opposition to certain of its provisions, particularly among the Republican senators, and some indicated that they might not vote for the bill in a full vote.

Over the span of a decade, the PDPRA as it currently stands would save $85 billion in Medicare spending and another $15 billion in Medicaid spending. Further, the Congressional Budget Office estimated that Medicare beneficiaries would save $27 billion in out-of-pocket costs and $5 billion in premiums during that same time period.

Key provisions of the PDPRA include:

  • Requiring drugmakers to pay a rebate to Medicare if they raise their prices more than the rate of inflation.
  • Capping out-of-pocket prescription drug costs for Medicare enrollees at $3,100 per year. The bill would eliminate the “donut hole” in Part D coverage and would instead require enrollees to pay 25% of their drug costs after meeting their deductible.
  • Capping the “add-on” payment that providers receive for most Medicare Part B drugs, biologicals, and biosimilars at $1,000 (the add-on is currently either 3% or 6%). However, to encourage providers to use biosimilars, the add-on for those would be increased to 8% for the first five years after the products are launched.
  • A number of transparency elements, such as requiring CMS to post online the Part D rebates that pharmacy benefit managers (PBMs) negotiate, and amending current laws to eliminate spread pricing.
Changes under the PDPRA would go into effect in January 2022.

Our Take: Republicans want to lower drug prices. Democrats want to lower drug prices. The White House wants to lower drug prices. Consumers are begging for lower drug prices. So why is it so hard for Congress to pass legislation to lower drug prices? Partisan perceptions, mostly.

In this case, 13 of the 15 Republican committee members wanted to remove the provision requiring drug manufacturers to pay a rebate if their price increases outpace inflation. Why? Because they don’t want the government interfering with private markets or being involved in price setting. Incidentally, Medicaid already uses this sort of rebate strategy.

On the other hand, most of the committee’s Republican members were in favor of an amendment that would have blocked a proposal the White House is considering to align U.S. drug prices with those paid in certain other countries. The amendment failed, narrowly.

Nearly all of the Democrats on the committee voted in favor of an amendment that would have allowed Medicare to negotiate drug prices with drug companies, but all 15 Republicans voted against it. So it, too, failed.

Democrats also want to revive the Trump administration’s recently scrapped rebate policy, which would have required PBMs who negotiate drug prices for federal health plans to refund some of those billions of dollars in rebates to Medicare beneficiaries. That could still show up in the House’s version of a drug pricing bill to be introduced in September.

You also have to factor pharma pushback into the mix. A number of industry executives met with President Trump at the White House on Wednesday to voice their concerns with the Grassley-Wyden bill. Citing two sources who had discussions at the White House, Reuters reported on Wednesday that Trump is considering an executive order to reduce prices on essentially all branded prescription drugs sold to government programs. That most certainly wouldn’t set well with Big Pharma.

According to the Financial Times, the pharmaceutical industry spent a record amount of money on lobbying Congress during the first six months of 2019 in its attempts to stave off pricing reforms. PhRMA alone spent over $16 million during that period.

It will be interesting to see how far Donald Trump will go to deliver on his pledge to lower drug prices before the election next year.

“You’ve got the president campaigning on doing away with the noninterference clause. Who knows what he’s going to do at the last minute,” Sen. Grassley told reporters after Thursday’s committee vote, according to The Hill. “If he would join forces with [Nancy] Pelosi, look at what that would do to everything that we Republicans stand for in the United States Senate.”

Partisan perceptions, indeed.

What else you need to know
Cutting costs while improving quality is possible for accountable care organizations (ACOs) that take on two-sided risk, according to study published July 18 in The New England Journal of Medicine. Researchers from Harvard, Massachusetts General Hospital, and Tufts University evaluated eight years of data from Blue Cross Blue Shield of Massachusetts’ Alternative Quality Contract (AQC), a population-based payment model with financial rewards and penalties. They found that the program reduced per-enrollee spending by up to 11.9% compared with a control group enrolled in commercial health plans, and quality of care increased in several categories. “Savings on claims were driven in the early years by lower prices and in the later years by lower utilization of services,” the study authors noted.

Tenet Healthcare Corp. is spinning off its Conifer business unit as an independent, publicly traded company. Tenet said the decision follows a strategic review process that commenced in December 2017, and it expects the spinoff to be complete by the end of the second quarter 2021. Conifer provides revenue cycle management and population health management services to health systems, physicians, and employer groups. In 2018, Conifer contributed $1.5 billion in revenue and $360 million in adjusted EBITDA to Tenet’s balance sheet.

CVS is testing a coordinated care pilot for Aetna commercial and Medicare Advantage beneficiaries requiring knee replacements, CVS CEO Larry Merlo said at a Medicare Advantage conference Tuesday. Merlo said pre- and post-operative care will be managed by a clinical team in the home, at CVS pharmacy locations, and through telehealth technology. A spokesperson said CVS will look for opportunities to expand similar coordinated care programs to other conditions and procedures for Aetna beneficiaries.

Civica Rx, the generic drug company formed by leading U.S. health systems, announced that it has signed a five-year agreement with London-based Hikma, a generic drug manufacturer. Under terms of the agreement, Hikma will produce 14 essential sterile injectable medications for Civica as a private label distributor. Civica said the list of products will be announced separately and that initial shipments are expected to begin before the end of 2019. The deal marks the second supplier partnership that Civica has signed; in May, the nonprofit signed with Xellia Pharmaceuticals, a Danish generic drug company, for a supply of anti-infectives vancomycin and daptomycin.

Executive moves
Advocate Aurora Health is dropping its co-CEO model, naming former Advocate CEO Jim Skogsbergh as the organization’s sole president and CEO, effective immediately. Skogsbergh has run the health system along with co-CEO Dr. Nick Turkal since the merger of Advocate Health Care and Aurora Health Care in April 2018. In a press release, Advocate Aurora Health said Dr. Turkal will support any transition needs as he departs to pursue other interests.

Paula Steiner is leaving her post as CEO of Health Care Services Corp.(HCSC), the nation’s fourth-largest health insurer said Wednesday. HCSC said board member David Lesar will serve as interim CEO until Steiner’s replacement is named. Maurice Smith, who most recently served as president of Blue Cross and Blue Shield of Illinois, has been named president of HCSC.

CVS Health has named Dr. Sree Chaguturu as chief medical officer for CVS Caremark. He will report to Dr. Troyen Brennan, executive vice president and chief medical officer of CVS Health.

Dr. Rod Hochman, president and CEO of Providence St. Joseph Health, has been named board chair of the American Hospital Association. He will serve a three-year term.

Dr. Reshma Kewalramani is being elevated to CEO of Vertex Pharmaceuticals, effective April 1, 2020. Dr. Kewalramani is currently Vertex’s chief medical officer. She will succeed Dr. Jeffrey Leiden, who will transition into the role of executive chairman of the board.

What we’re reading
share

Request a Call from Darwin Research Group and we will get right back to you.