The House of Representatives today approved House Speaker Nancy Pelosi’s signature drug pricing bill, H.R. 3, aimed at lowering the prices that Americans pay for prescription drugs.
With a 230 to 192 vote in favor of the Elijah E. Cummings Lower Drug Costs Now Act, Congress took its first major legislative swing at curbing a pharmaceutical business model that has unsustainably driven up costs to the point that prescription drugs are increasingly straining budgets for families, taxpayers, and employers.
Here’s a breakdown of what’s in the bill and what we expect will happen next:
H.R. 3 aims to lower drug prices through negotiating power and limits on price hikes.
The bill allows Medicare to negotiate drug prices for the first time, giving the federal government — one of the largest purchasers of U.S. prescription drugs — significant leverage to drive down prices and reap substantial savings for taxpayers.
Under H.R. 3, Medicare would be able to negotiate prices for at least 25 prescription drugs per year initially, eventually increasing to at least 35 per year. The negotiation process will rely on an international pricing index, similar to the one used in the Trump Administration’s Part B proposal, that would cap maximum negotiated prices at 1.2 times the average price charged in six other developed countries.
In addition, the bill includes a provision, often called the Part D inflation penalty, which limits the increases of list prices of prescription drugs to inflation. Because out-of-pocket payments for many patients are directly linked to list prices, this provision is critical to providing relief for consumers at the pharmacy counter.
Under pressure by progressive members of the Democratic caucus who threatened to pull their support of the package, the bill was amended at the last minute. The number of drugs subject to negotiation increased from 35 to 50, and the amendment also extends the Part D inflation penalty to individuals with private insurance plans.
Lastly, the bill limits prescription drug costs to $2,000 out-of-pocket for Medicare Part D beneficiaries, granting much-needed financial relief to elderly individuals and those with disabilities, two demographics that tend to be high-utilizers of prescription drugs.
It’s a big money saver.
Beyond the significantly lower prices many would see at the pharmacy counter, H.R. 3 is also expected to reap substantial savings for U.S. taxpayers. Recent analysis by the nonpartisan Congressional Budget Office (CBO) estimates that the negotiation process and inflation rebates in H.R. 3 would save well over $500 billion over a decade. For reference, that’s more than five times the annual Florida state budget. Savings from the plan would be used to offset the out-of-pocket cap for Medicare Part D beneficiaries, provide coverage enhancements for low-income beneficiaries, and provide vision, hearing, and dental coverage for Medicare patients. Savings would also go toward increasing federal funding for the National Institutes of Health (NIH), the government’s leading medical researcher, the U.S. Food and Drug Administration, which regulates the nation’s drug supply, among other things, and the federal response to the opioid crisis.
The bill is unlikely to pass into law.
The Republican-controlled Senate has already indicated that it’s unwilling to take up the House bill, and H.R. 3 has faced vocal criticism from President Trump and other members of the Republican Party.
Earlier this week, House Republicans introduced their own competing drug pricing package called the Lower Costs, More Cures Act (which incorporates some ideas from an existing bipartisan Senate Finance Committee package). The proposal diverges from H.R. 3 significantly. It doesn’t allow for Medicare negotiation and does not penalize price increases at inflation.
Instead, it calls for capping out-of-pocket drug expenditures at $3,100 for Medicare beneficiaries, sparking generic development by requiring brand-name drugs to provide samples to generic companies (often referred to as the CREATES Act), and banning pay-for-delay practices, a patent tactic that brand name drug makers use to stifle competition.
This new proposal differs from the Senate Finance Committee’s existing proposal by excluding the penalty on price increases above inflation — an idea touted by Trump but panned by pharmaceutical companies — and adding a requirement mandating drug companies disclose certain information on their costs if prices increase faster than inflation.
So what’s next? If, as expected, the Senate declines to take up H.R. 3, attention will likely shift to the two Republican-backed proposals, although both bills will likely require additional concessions in order to gain broader support.
Regardless of what happens from here, the Congressional momentum on drug pricing marks an unprecedented move by the federal government to finally address the multifaceted problems of an industry that has been able to grow its prices unchecked for years. H.R. 3 marks the start of a difficult conversation about the tradeoffs Congress must make when trying to balance sustainable affordability and innovation.