"A deal between Senate Democrats has revived legislation to significantly expand government regulation of prescription-drug prices and limit the out-of-pocket costs of Medicare seniors who use expensive medicines.
If the bill becomes law, Medicare would gain the authority to negotiate how much it pays for certain prescription drugs and force drugmakers to provide a rebate if they raise the prices of their medicines above the inflation rate.
The legislation, part of a climate, tax and healthcare package agreed to by holdout Sen. Joe Manchin (D., W.Va.) and Senate Majority Leader Chuck Schumer (D., N.Y.), would also cap out-of-pocket drug costs for Medicare beneficiaries at $2,000 a year.
Among the drugs that could face price negotiation are blood thinner Eliquis from Bristol-Myers Squibb Co. and Pfizer Inc., Johnson & Johnson's Darzalex multiple-myeloma therapy and Novo Nordisk A/S's diabetes and weight-loss treatment Ozempic, according to an analysis by SVB Securities.
The provisions would inflict a relatively modest financial hit on the pharmaceutical industry, analysts say, because only a small basket of medicines that have been on the market for many years and lack competition will be eligible for direct negotiation each year.
Government price negotiation and the inflation rebate would reduce U.S. drug spending by $202.5 billion over a decade, according to the Congressional Budget Office. The U.S. is projected to spend $380.4 billion on prescription drugs this year, excluding those used in hospitals and outpatient clinics, and $567.1 billion in 2030, according to Medicare actuaries.
For the first time, however, the provisions would give the federal government a say in determining drug prices in Medicare, including the Part D drug-benefit program, which currently forbids it and represents a third of total pharmaceutical spending.
Lawmakers have for years threatened to take action in response to polls showing that prescription-drug prices are among the biggest concerns of voters. Yet virtually all such efforts have stalled. If Congress succeeds this time, it will be a watershed, said Brian Abrahams, a biotech analyst at RBC Capital Markets.
"The biggest element that's been underappreciated is Congress's ability to push through any drug-pricing legislation," said Dr. Abrahams. "It's not a done deal, but it's moving closer and closer to reality."
Several industry executives said, while discussing quarterly financial results last week, that they supported the lowering of patients' costs but opposed government price negotiation.
The executives said the law would depress research investments. Many also said the legislation won't prompt true negotiation, because the government will have power to levy an excise tax on sales of drugs on which manufacturers refuse to negotiate.
"In reality, it is not price negotiation because they are forcing their will by implementing a 95% tax," Pfizer Chief Executive Albert Bourla said.
The bill would redesign key features of Medicare Part D by capping how much seniors spend in copays and coinsurance at $2,000 annually, compared with potentially unlimited cost-sharing currently. Seniors also would no longer have to pay 5% of their drug's total cost after their out-of-pocket spending exceeds a certain threshold, which is $7,050 this year.
An estimated 1.4 million people with Medicare had out-of-pocket spending higher than $2,000 in 2020, according to the Kaiser Family Foundation.” [1]
1. U.S. News: Deal Marks Big Shift in Drug Costs
Walker, Joseph. Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 01 Aug 2022: A.4.
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