Published on: April 23, 2021
Authors: D. Mark WilsonH.R. 3) would enable Medicare to negotiate drug prices and allow employer plans access to those rates, a move which is estimated to lower drug costs but would impact the U.S. pharmacy supply chain.
H.R. 3 is estimated to save employers $43.1 billion in drug costs over the next ten years, according to the Office of the Actuary for the Centers for Medicare and Medicaid Services However, it would disrupt the U.S. pharmacy supply chain in unexpected ways.
Some experts disagree on the benefits of H.R. 3, with the Congressional Budget Office projecting eight to 15 fewer new drugs being brought to market over the next 10 years.
The far-reaching legislation would, among other things:
- Create a “fair price drug negotiation program” in which the HHS Secretary would negotiate with drug manufacturers on a “maximum fair price” for up to 250 of the costliest drugs in the U.S. without competition—including insulin;
- Limit the price to no more than 120% of the volume-weighted average price in six other countries (a.k.a., international price index) while indexing future increases to inflation;
- Require manufacturers to offer negotiated prices to individuals in employer and individual health plans; and
- Penalize manufacturers that refuse to negotiate with an excise tax up to 95% of the price of the drug until an agreement is reached.
Separately, three GOP committee leaders introduced the Lower Costs, More Cures Act (H.R. 19), which would lower costs, prohibit “pay for delay” agreements, improve transparency, and prevent the use of abusive spread pricing and related practices in Medicaid.
Outlook: Passage of H.R. 3 is a high priority for Speaker Pelosi and some version of it is likely to be included in a budget reconciliation bill that will move in Congress this year. However, while lowering drug prices is also a goal of President Biden and Majority Leader Schumer they may not be willing or able to go as far as the House. With just 50 votes in the Senate to work with any one Senator could blow up a deal and the pharmacy supply chain is likely to pull out all of the lobbying stops to make their case with members. Whether this dynamic leads to a compromise that focuses on inflation caps, greater transparency, and other pro-competition reforms remains to be seen.