Recently, progressive democrats in the House of Representatives lead by Rep. Pramila Jayapal (D-WA) and Debbie Dingell (D-MI) released the long-awaited Medicare for All Act of 2019 (M4A) proposal. M4A differs from single-payer plans released by Senator Bernie Sanders (I-VT) and various Washington think tanks. One of the most significant differences is that the Act includes a mechanism to address the rising price of prescription drug costs. Will the differences be enough to get M4A over the legislative finish line? That’s the trillion dollar question.
M4A is premised on the policy goal that the government will provide healthcare for all U.S. citizens. Similar to other single-payer plans, M4A is designed to ensure that patients are not responsible for any cost sharing of medical expenses and that government coverage include doctors, hospitals, preventive care, prescription drugs and other forms of care. Private insurers would be allowed to offer plans that do not compete with the government program.
There are three significant differences between M4A and the other leading single-payer legislative proposal from Senator Sanders.
- M4A has a two year phase in period as opposed to a four year phase in period
- M4A would offer long-term care (e.g., nursing home) coverage, whereas the Sanders plan does not include such coverage
- M4A contains compulsory licensing for prescription drugs. This concept has appeared in legislative proposals aimed at drug pricing and even in stand-alone legislation last Congress, but has not been a part of single-payer plans.
What do we know about the M4A compulsory licensing provision? According to the fact sheet released by Jayapal and Dingell, M4A would authorize “Medicare to issue compulsory licenses to allow generic production if a pharmaceutical company refuses to negotiate a reasonable price.”
Understanding the compulsory licensing stage first involves examining the requirement that manufactures negotiate with the government on pricing. Looking at the language in Section 616 of M4A, the bill requires the Secretary of the Department of Health and Human Services to annually negotiate prices for “pharmaceuticals, medical supplies, and medically necessary equipment.” HHS would promulgate rules to set the price taking into account:
- costs associated with research and development of the drug or product;
- risk adjusted value of Federal Government subsidies and investments related to the drug or product;
- therapeutic value of the drug or product, including cost effectiveness and comparative effectiveness;
- cumulative global revenues obtained through sales of the drug or product;
- net prices at which the drug is sold in other high income countries with per capita incomes comparable to that of the United States.
If a manufacturer is unwilling to negotiate its price, then the compulsory license provision kicks in. M4A authorizes “the use of any patent, clinical trial data, or other exclusivity with respect to such drug as the Secretary [of HHS] determines appropriate for purposes of manufacturing such drug for sale under the [government program].” Moreover, if the manufacturer refuses to negotiate, HHS “shall grant open, non-exclusive licenses allowing any person to make, use, offer to sell, or sell, or import into the United States such drug or product, and to relay on the regulatory test data of such drug or product.”
Compensation for this open non-exclusive licenses is limited to a “royalty,” set by HHS that is “reasonable and affordable” In determining what is reasonable and affordable, HHS “shall consider:
- the extent to which the current holder of a patent or the holder of an application described under subsection has recovered or is expected to recover, through sales other than under this section, the research and development costs incurred by such holder; and
- such other factors as the Secretary considers appropriate, including the impact of the covered pharmaceutical, medical supply, medical technology, or medically necessary assistive equipment on improving health outcomes for individuals, and industry standard licensing rates.”
M4A and its counterparts have many unanswered questions including financing. Even with over 100 co-sponsors, the bill still faces a long, uncertain path in the legislative process. We will be tracking all the single-payer proposals along the way.