Drug Pricing Proposal Would Give Employers Access to Government-Negotiated Prices

September 10, 2021

Drug pricing legislation in the initial reconciliation bill text allows employers to access Medicare-negotiated drug prices, but it is unclear whether the provision will survive Senate rules limiting what can be included in the budget bill.  HR Policy urged Congress to retain employer access to the negotiated prices, noting that without such access employer health care costs could rise 3.7% per year above normal trends.

Employer health care costs could increase 3.7% per year above current growth projections:  HR Policy’s American Health Policy Institute found that if manufacturers raise prices on commercial payers to compensate for reduced revenues from Medicare, insurance premiums for those enrolled in employer health plans could increase by as much as 3.7% per year above current growth projections.  This increase would result in $125 billion in higher prices for employers and their employees over just five years. 

Drug pricing reform that does not allow employers to access the negotiated prices will leave out the 160 million Americans that also struggle to pay for their needed medications.  Our letter cites a West Health and Gallup finding that individuals under 65 report greater difficulty affording their medications than those enrolled in Medicare.  

Meanwhile, the Biden administration released a government drug price negotiation plan that includes employer plans and details the administrative measures it will take in addition to legislation.  The administrative measures include tying reimbursement for drugs in Medicare plans based on the drug's clinical value and providing federal funding for research into new treatments.  You can read more about the Biden plan here.

Other notable health care provisions in the reconciliation bill text include:

  • The Parity Enforcement Act (H.R. 1364), which amends ERISA and gives the Department of Labor the ability to level civil monetary penalties against health insurers and plan sponsors for mental health parity violations, although there will likely be an amendment introduced to strike this provision.

  • Medicare expansion, which is unlikely to extend to employees with an offer of affordable coverage.  Both the Energy and Commerce and Ways and Means Committees included text on expanding hearing and vision coverage and adding dental coverage to seniors enrolled in Medicare.  If enacted like the ACA, these expansions will not be available to employees with an affordable offer of coverage from their employer. 

Outlook:  There is talk that the Senate Finance Committee will consider pegging Medicare drug prices to the prices offered to the veteran’s health program, otherwise known as the Federal Ceiling Price.  It is yet to be determined if employers will be included in the Senate drug pricing proposal legislation, amid Byrd rule concerns.  If they are not included, HR Policy and other employer groups will oppose the package.