House Democrats are “likely” to include a controversial provision in the upcoming infrastructure bill that would require Medicare to negotiate down the prices it pays drug companies, a senior Democratic aide told The Washington Times.
House Speaker Nancy Pelosi has raised the idea previously but had only described it as “under consideration.” The aide’s comments are the strongest indication yet that said that Democrats could add the proposal, which is expected to be fought bitterly by the powerful drug industry, to what’s already shaping up to be a heated and partisan debate over the massive infrastructure bill.
To proponents, the benefits are clear. They say the measure would lower the prices that Medicare pays for dozens of drugs, creating $456 billion in savings, according to the Congressional Budget Office.
Congressional Democrats could use the money on other aspects of the infrastructure plan, including one of Mrs. Pelosi’s top priorities, to expand the number of community health centers.
“If we were able to do that, we could save almost a half a trillion dollars, like $450 billion?” Mrs. Pelosi said at a recent press conference.
But the $456 billion would come out of the pockets of drug companies, who do not want to be used as a piggy bank to fund Democratic priorities, The industry is warning that Americans would ultimately suffer because drug companies would have less money to spend on developing new treatments.
“Threatening hundreds of thousands of jobs, jeopardizing access to medicines and upending an innovative biopharmaceutical industry to pay for unrelated government programs is the wrong approach,” said Brian Newell, spokesman for Pharmaceutical Research and Manufacturers of America, or PhRMA.
Mr. Newell called the idea “an irresponsible scheme.”
The idea is expected to be another reason for Republicans to vote against the infrastructure plan. Top Republicans including House Minority Leader Kevin McCarthy of California did not return requests for comment. It’s also uncertain whether the idea could pass the evenly divided Senate.
A Penn Wharton Budget Model estimated on Wednesday that the first phase of Mr. Biden’s proposal, which would focus on physical infrastructures like roads, bridges and electric-car charging stations, would actually cost $2.7 trillion over a decade. Letting Medicare negotiate drug prices could be used to offset some of the additional costs that would come with a second-phase bill that Mr. Biden will soon propose, focusing on “human infrastructure.”
The proposal would fundamentally change how the price for drugs covered by Medicare is determined for 44 million beneficiaries. Congress, in creating Medicare Part D — which covers part of the cost of seniors’ prescriptions — did not allow the government to negotiate prices with drug companies.
Under the Democratic proposal, Medicare would be required to negotiate the price of at least 25 brand-name drugs that have no generic competitors. And it would give the government all the leverage in the negotiations.
Drug companies could accept the lowest price for the drugs in Australia, Canada, France, Germany, Japan, and the United Kingdom. Or it could negotiate with Medicare, but the average price of the drugs in those six countries would be the most the government would be allowed to agree to. And the government could insist on paying even less.
If the drug companies do not agree to a price, the government would tax the revenue for the drug in question, beginning at 65% and rising each quarter until it hits 95%.
“Manufacturers effectively have to accept the price dictated by the [Health and Human Services] Secretary,” said a report by the Commonwealth Fund, a left-leaning healthcare policy foundation.
The 2019 CBO report said there would be some impact on the development of new cures. It estimated that eight fewer drugs would be introduced in the U.S. over the next decade, about — about 3 percent fewer than the 300 drugs approved by the FDA, on average, every decade.
Dan Adcock, government relations and policy director for the National Committee to Preserve Social Security and Medicare, said about half of the nation’s Medicare beneficiaries make less than $29,000 a year and spend about one-fourth of their Social Security checks on prescriptions.
“Many seniors have to cut pills or make the hard decision of paying their rent or their bills” or taking their medication, he said. Mr. Adcock questioned whether drug companies would really cut back on developing new drugs, instead of spending less on marketing and advertising.