In 2019, Congress and the Administration set out to make strides to effectuate policies to curb the rising costs of prescription drugs. These efforts while significant in number, were few in completion. Congress, while spending months on an array of legislation, did not manage to send anything major to the President’s desk. The Administration pushed forward on its plans, but made little measurable headway and arguably suffered setbacks. Complicating matters further was the fact that several proposals appeared as both proposed rules as well as legislative provisions which sapped the much needed momentum necessary for a clear pathway for success. All that being said, drug pricing is remains a top issue for policymakers and the table is set for potential action in 2020.
There were several legislative proposals from both chambers to address drug pricing in 2019. Perhaps the most significant in terms of potential impact was H.R. 3, the Elijah Cummings Lower Drug Costs Now Act. The centerpiece of H.R 3 is the authority granted to the Secretary Health and Human Services to negotiate the price Medicare will pay for the 250 most costly drugs, calculated by price times volume. The proposal also includes a maximum price for any Medicare negotiated drug through the creation of the Average International Market (AIM) price. H.R. 3 would also cap Medicare beneficiaries’ costs at $2,000 per year. Finally, H.R. 3 requires manufacturers who sell drugs to Medicare Part B or D and have raised prices more than the rate of inflation since 2016, to either lower the cost of the drug or rebate the above inflation amount to the U.S. Treasury.
The week that H.R. 3 was to be considered on the House floor, the House Republican Caucus released its counter proposal, H.R. 19, the Lower Costs, More Cures Act. As expected, Medicare negotiation was not included. However, the package does contain several proposals that have advanced through committees of jurisdiction. This allowed the authors to make a legitimate claim that the package was bipartisan. These ideas include a provision to require manufacturers to provide notification and justification of price increases that exceed 10 percent in one year or 25 percent within three years as well as several measures designed to increase the amount of generics in the marketplace (e.g., the CREATES Act, pay for delay reform, anti-exclusivity parking).
H.R. 19 failed as amendment in the nature of a substitute to H.R. 3, which itself passed the House along party lines. However it is notable that the CREATES Act was passed and signed into law as part of the 2020 Further Continuing Resolution Act.
Not to be outdone, the Senate had its own drug pricing packages. First released in July and updated earlier this month, the Senate Finance Committee proposal, the Prescription Drug Pricing Reduction Act, (PDPRA) lead by Chairman Charles Grassley (R-IA) and Ranking Member Ron Wyden (D-OR), contains provisions targeting drug prices. Among the provisions in PDPRA, is one provision capping seniors’ costs at $3,100, as well as a requirement that manufacturers rebate back to Medicare any price increases above the rate of inflation (but not retroactively as is the case in H.R. 3). The proposal also permits some seniors to spread out costs throughout the year, and a requirement that plan sponsors and PBMs pass price concessions to consumers.
Finally, Senate Health, Education, Labor and Pensions Committee Chairman Lamar Alexander (R-TN), House Energy and Commerce Chairman Frank Pallone (D-NJ) and Ranking Member Greg Walden (R-OR) released a proposal to address surprise billing that included drug pricing proposals such as the CREATES Act and anti-generic blocking which were also found in H.R. 19.
With the patchwork of legislation and lack of movement by congress, Administration sought to claim the drug pricing high ground and offered a number of proposed rules to address drug prices. Everything began with the Fiscal Year 2020 budget, which contained an array of legislative proposals that build upon 2018’s Blueprint to Lower Drug Prices and Reduce Out of Pocket Costs. The FY 2020 budget concepts focused on increasing competition, encouraging negotiation (but nothing like H.R. 3) and encouraging lower list prices for prescription drugs. Many of these provisions, such as eliminating beneficiary cost sharing above the catastrophic coverage threshold, found their way into the PDPRA and collection of bills described above.
Ultimately, the Administration did not fare much better in 2019 on its high-profile drug pricing proposals. One such proposal that has yet to emerge in final form but was eagerly anticipated after its 2018 advanced notice of proposed rulemaking, was the international drug pricing index (IPI). This proposal bases reimbursement of drugs in the Medicare Part B program on prices paid for the same drugs in 14 countries including Canada, Japan and 12 European countries. There was no movement in 2019 on the IPI rulemaking, but H.R. 3’s AIM is effectively the same idea.
In July 2019, the administration proposed a two-path program to allow foreign prescription drugs to be imported into the United States. Path one allows states, drug wholesalers or pharmacists to submit plans for a demonstration project to HHS how it would import drugs from Canada to ensure safety and cost reduction. This path required a notice of proposed rulemaking which was issued earlier this month. Path two would allow a manufacturer of FDA-approved drugs to import into the U.S. versions of such drugs that the manufacturer sells in foreign countries. If the manufacturer can demonstrate to FDA that the foreign version of the drug is identical to the version sold in the U.S. This authorization would be provided through FDA guidance issued under existing statutory authority. This guidance did not make an appearance this year.
Three other major regulatory initiatives stalled out in 2019. The Part D rebate rule was withdrawn. (but note, a similar concept was included in PDPRA). In 2018, a proposed rule was released that would allow Medicare Part D plan sponsors to exclude drugs in the “six classes” (antidepressants, antipsychotics, anticonvulsants, immunosuppressants for transplant rejection, antiretrovirals, and antineoplastics) but the final rule released in May, did not include that that plan. Finally, in May, the final rule requiring pricing disclosure in television advertisements was issued. That rule was struck down in July.
Despite the lack of definitive action in 2019, the issue of curbing drug pricing will remain a top priority for Congress and the Administration. Whether or not a final legislative package emerges that makes it to the President’s desk, we anticipate further negotiation between House and Senate leaders on the myriad proposals debated this year. From the Executive Branch, we will also be looking at the FY 2021 budget proposal, new rulemakings and perhaps finalization of existing proposed rules. Oh, and it’s an election year, which could intensify or muddle the discussions. Much to watch for so stay tuned.