Vermont Business Magazine Representative Peter Welch (D-VT), Senator Bernie Sanders (I-VT) and Representatives Elijah Cummings (D-MD) and Lloyd Doggett (D-TX) on Wednesday introduced legislation to require the federal government to leverage its bulk purchasing power to negotiate lower Medicare drug prices for seniors. Current law prohibits the Secretary of Health and Human Services from negotiating directly with pharmaceutical companies for lower Medicare drug prices.As a result, Medicare pays, on average, 73 percent more than Medicaid and 80 percent more than the Veterans Administration (VA) for brand-name drugs. If Medicare paid the same price for drugs as Medicaid and the VA, the federal government could save between $15.2 billion and $16 billion a year.
Separately Wednesday, Rep. Welch and Rep. Cummings sent a letter to President Trump expressing their “profound disappointment” that he has failed to follow through on his commitment to work with them to write and pass Medicare drug price negotiation legislation. During the 2016 presidential campaign, then-candidate Trump expressed strong support for Medicare price negotiation. In an Oval Office meeting on March 8, Welch and Cummings solicited input and support from the President for their bill. The letter sent by the pair today follows two previous unanswered letters on April 20, 2017 and June 21, 2017.
“Why is it that today Americans are walking into pharmacies and finding that the price of their medicine has doubled or tripled for no particular reason? The answer is that the drug companies can get away with it,” Sanders said. “At a time when we spend many billions of dollars on medicine, it is time for Medicare to be able to sit down with the drug companies and negotiate prices.”
“It simply makes no sense that Medicare is prohibited by law from using its immense purchasing power to get a better deal from drug companies for seniors. Paying retail prices for wholesale purchases is absurd. It's long past time we put an end this sweetheart deal for big Pharma,” Welch said.
This bill is cosponsored in the House by Reps. Pocan, Higgins, Ellison, Schakowsky, Kaptur, Norton, Jayapal, Cohen, Gabbard, Grijalva, Nadler, Raskin, and DeLauro and in the Senate by Senators Leahy, Reed, Gillibrand, Harris, and Franken.
This bill is endorsed by the Alliance for Retired Americans, American Federation of Teachers, the Center for Medicare Advocacy, CREDO, Doctors for America, the Economic Policy Institute Policy Center, Families USA, Knowledge Ecology International, Medicare Rights Center, MoveOn, the National Committee to Preserve Social Security and Medicare, Patients for Affordable Drugs, Prescription Justice, Public Citizen, Social Security Works, and The Senior Citizens League.
Medicare Drug Price Negotiation Act
Section-by-Section Summary
Section 1: Title – Medicare Drug Price Negotiation Act
Section 2: Negotiation of Lower Covered Part D Drug Prices on Behalf of Medicare Beneficiaries and Establishment and Application of Formulary by the Secretary of Health and Human Services Under Medicare Part D
Negotiation Framework
This Section strikes the provision of current law (the noninterference clause) that prohibits the Secretary of Health and Human Services (HHS) from negotiating drug prices on behalf of Medicare Part D beneficiaries and directs the Secretary to negotiate directly with drug manufacturers for lower prices on covered Part D drugs.
The Secretary is directed to prioritize the following categories of drugs for negotiation: high-cost drugs, drugs that have had significant price increases, drugs that drive up Medicare Part D spending, and drugs without competition (single source drugs and biologics) that also meet one of the other criteria for prioritization.
The Secretary is directed to issue public guidance before negotiations begin which identifies criteria to be considered during negotiations, including the particular drug’s comparative clinical and cost-effectiveness, budgetary impact on Medicare, and the number of similarly effective drugs available. The Secretary is also directed to issue a public report following each negotiation period to document how these criteria were assessed in a given negotiation.
Negotiations will be conducted in groupings identified in advance by the Secretary. Negotiations will be conducted over the course of one plan year. The first negotiation year will begin on January 1, 2019. Once a price is reached, that price will remain in effect for three years.
Use of Formulary and Fallback Prices
This Section directs the Secretary to either establish one national drug formulary for use by all prescription drug plan sponsors or direct plan sponsors to make certain changes to their own formularies for drugs that are under price negotiation. Plan sponsors are able to use benefit design and other formulary tools to secure steeper discounts or rebates below the prices negotiated by the Secretary.
This Section also establishes fallback prices that are adopted automatically if negotiations between the Secretary and a drug manufacturer are not successful after one plan year. The fallback prices are the lowest of the Federal Ceiling Price (the highest price that can be charged to direct federal purchasers of drugs), the lowest price charged by ten Organization for Economic Cooperation and Development (OECD) countries with similar GDPs per capita as the United States, and the lowest, or “Best Price” obtained by the Medicaid program.
Patient Protections
This Section preserves critical protections for patient access by including in any formulary
certain categories and classes of drugs that are protected under current law and by strengthening
the patient appeals process for accessing drugs that are not covered by the formulary.
This Section directs the Medicare Payment Advisory Commission to study whether price
negotiations are effective in securing lower prices for Part D beneficiaries, generating savings for
the federal government, and affecting drug prices in the commercial market.
Section 3: Requiring Manufacturers to Provide Drug Rebates for Drugs Dispensed to
Low-Income Individuals
This Section restores minimum rebates for low-income Medicare beneficiaries that were lost
when Medicare Part D was established in 2006. Prior to Medicare Part D, individuals who were
dually eligible for Medicare and Medicaid received their prescription drug benefits through the
Medicaid program. After Part D was created, these people began receiving their drug benefits
through Medicare. Drug manufacturers that participate in Medicaid are required to provide back
to Medicaid statutory discounts in the form of rebates, but there are no similar rebates for
Medicare. This Section applies to both brand-name and generic drugs and extends rebates to all
Medicare beneficiaries who are covered by the Low-Income Subsidy, in addition to those who
are dually eligible for Medicare and Medicaid. The Congressional Budget Office has projected
that restoring these rebates would save $145 billion over ten years.
For a copy of the full legislation,click here.