House Commerce Committee Issues Hearing Memo on Making Prescription Drugs More Affordable
To: Subcommittee on Health Members and Staff
Fr:
Re: Hearing on "Making Prescription Drugs More Affordable: Legislation to Negotiate a Better Deal for Americans"
On
I. BACKGROUND
American consumers bear a significant burden for the rising costs of prescription drugs as prices continue to increase and total drug spending continues to grow. The number of adults who report that they or a family member have not filled a prescription, rationed medication below their prescribed dose, or skipped doses altogether because they could not afford the full cost of their medicines has risen to nearly 30 percent in 2019./1 Additionally, one in ten adults report that their health has declined because they were unable to afford to take their prescription as recommended./2
As drug prices rise, so do the out-of-pocket costs that consumers face. Nearly half of the most expensive brand-name prescription drugs--those exceeding
For Americans enrolled in Medicare Part D, under current law, beneficiaries have no out-of-pocket maximum and lack the financial certainty to know what their total out-of-pocket spending could be annually. Under the current Part D standard benefit design, enrollees have cost-sharing including a
Prescription drug prices are growing at levels that are increasing health insurance premiums/8, driving unsustainable cost growth in Medicare and Medicaid,/9 and putting Americans' health at risk./10
A large portion of these growing costs stem from the utilization of single-source brand drugs that lack generic competition. In 2017, brand drugs accounted for 77 percent of total Part D spending (
Most other high-income countries spend significantly less on prescription drugs than
Some researchers have argued that granting the Secretary of
Under current law, the Secretary is prohibited from interfering with "the negotiations between drug manufacturers and pharmacies and PDP [prescription drug plan] sponsors..."/17 This clause, often referred to as the "noninterference clause" of the Medicare Part D statute, was enacted in the Medicare Modernization Act of 2003, which established the Medicare Part D program. Since the implementation of the Medicare Part D program, Medicare spending for Part D has increased from about
II. LEGISLATION
A. H.R. 3, Lower Prescription Drug Costs Now Act
i. Title I: Negotiation
H.R. 3, introduced by Chairman
In prioritizing the selection of drugs for negotiation each year, the Secretary shall select for inclusion the drugs that will result in the greatest savings to the Federal Government or consumers. Additionally, once a drug is selected for negotiation it will remain a selected drug until competition enters the market.
After entering into agreements with each manufacturer of a selected drug, the Secretary will directly negotiate with each manufacturer to establish a maximum fair price (MFP) that will be applied to the Medicare program, as well as available to group health plans or health insurance issuers offering health insurance coverage in the individual or group market. H.R. 3 establishes an upper limit for the price reached in any negotiation as no more than 1.2 times (or 120 percent) of the volume-weighted average price of six countries (
While negotiating the MFP, the Secretary shall take into consideration a number of factors, including research and development costs of the drug, as well as the cost of production, information on alternative treatments and the extent to which the drug represents a therapeutic advance over existing alternatives, and domestic and international sales information.
If a manufacturer refuses to enter into negotiations after being selected by the Secretary or if the manufacturer leaves the negotiation before a MFP is agreed to, then the manufacturer will be assessed an escalating excise tax levied on the manufacturer's sales during the period of noncompliance.
ii. Title II: Rebates by Manufacturers for Medicare Part B and Part D Drugs with Prices Increasing Faster than Inflation
H.R. 3 establishes a mandatory rebate for drug manufacturers of all covered Part B and Part D drugs that increase in price faster than inflation. A Part B rebatable drug is defined as a drug or biological paid for under Medicare Part B, excluding certain vaccines and drugs that have average total allowed charges for a year per individual of less than
For Medicare Part D, a Part D rebatable drug is defined as a covered part D drug except if a drug or biological has an average total cost under a PDP per individual who uses such drug that is less than
iii. Title III: Part D Modernization and Redesign
H.R. 3 would make changes to the structure of the standard benefit design for Medicare Part D and create an out-of-pocket maximum for Part D enrollees. Starting for plan year 2022, Part D enrollees' out-of-pocket costs would be capped at
In the initial phase of coverage, following an enrollee's deductible phase, PDPs would be responsible for 65 percent of spending, while enrollees would be responsible for 25 percent and manufacturers would be responsible for 10 percent. Following the initial coverage phase, an enrollee's out-of-pocket drug costs will be capped at
B. H.R. 1046, Medicare Negotiation and Competitive Licensing Act of 2019
H.R. 1046, introduced by Rep.
C. H.R. 448, Medicare Drug Price Negotiation Act
H.R. 448, introduced by Rep.
H.R. 448 also establishes and applies a formulary for required use by PDPs or requires PDPs to take into account negotiations carried out by the Secretary and make changes as necessary. H.R. 448 would also require drug manufacturers to provide mandatory rebates for drugs purchased by Part D low-income subsidy enrollees who have incomes up to 150 percent of the federal poverty level and meet certain asset tests.
D. H.R. 275, Medicare Prescription Drug Price Negotiation Act of 2019
H.R. 275, introduced by Reps.
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Footnotes:
1/
2/ Id.
3/ The Journal of the
4/
5/ MedPAC, Part D Payment System (
6/ Id.
7/ An Overview of the Medicare Part D Prescription Drug Benefit,
8/ Health Affairs, Prescription Medications Account For One In
9/
10/ Annals of Pharmacotherapy, Cost of Prescription Drug-Related Morbidity and Mortality (
11/ Avalere Analysis Examines Drug Spending in Medicare Part D,
12/
13/ The Journal of the
14/
15/ Supra note 9.
16/ The Journal of the
17/ Sec.1860D-11(i)
18/ MedPAC, The Medicare prescription drug program (Part D): Status Report (
19/
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