Yesterday, on Tuesday, July 23, Senate Finance Chairman Chuck Grassley (R-Iowa) and Ranking Member Ron Wyden (D-Ore.) released a long-awaited drug pricing proposal, The Prescription Drug Pricing Reduction Act (PDPRA).  The committee provided a 40-page summary of what is contained in the bill, but as of today, there is no legislative text is available to the public.

For weeks, there was little information on what would be in the legislation since it was being discussed and written behind closed doors.  Only rumors about policies that might be included appeared in local Capitol Hill journals.  On Thursday, July 25, 2019, the committee is scheduled to markup, or debate and rewrite the legislation. This gives committee members only two days to thoroughly review and understand the many fundamental changes that will be made to the structure and payment policies of Medicare Part B, Medicare Part D, and Medicaid drug benefits.  This is not how important legislation that will change Medicare and Medicaid should be considered.  The process is sounding eerily close to that of Obamacare and Speaker Nancy Pelosi’s famous words about the Patient Protection and Affordable Care Act (ACA), “We have to pass the bill so that you can find out what is in it”

While CAGW is particularly intrigued with changes to Medicare Part D that would introduce more private sector negotiating power in the coverage gap and the catastrophic phases of Medicare Part D that should lower out-of-pocket costs to beneficiaries, we are concerned there has not been enough time to study and thoroughly understand the consequences of the changes.  According to the summary document, starting in 2022, a beneficiary would pay the entire deductible of $415, then the enrollee would be responsible for 25 percent of the cost and the plan would cover 75 percent.  Once the catastrophic level is reached at $3,100, the plan pays 60 percent, Medicare pays 20 percent, and pharmaceutical companies would also pay 20 percent.  Much more analysis and deliberation need to occur to fully understand potential savings for both beneficiaries and taxpayers.

It is too bad the PDPRA did not continue with more market-based solutions to lower drug costs. Unfortunately, the rest of the legislation takes a U-turn and adopts more government interference by using price controls and regulation that will stifle pharmaceutical innovation and ultimately drive up healthcare costs for everyone.

For example, there are Medicare Part D and Medicare Part B inflationary rebates tied to the urban consumer price index, or CPI-U.  These are destructive price controls. 

There are also “transparency requirements” that will not lower drug costs, but instead will be harmful because of their ability to interfere with the robust negotiations, which occur among pharmacy benefit managers, druggists, and insurers.

The legislation will also require drug manufacturers to justify a Wholesale Acquisition Cost (WAC) increase based on a subjective figure set by the secretary of the Department of Health and Human Services (HHS).  It is important to remember the WAC is a list price and does not represent what most patients pay after discounts and rebates.  Furthermore, some of the information required to be released would be proprietary, enabling competitors to discover trade secrets.  Some costs may be difficult to determine, such as research spent on a particular drug.  Many drugs are studied and have found to be ineffective for the indication it is intended.  Years later, the drug could be effective for another indication and researched again.  And many drugs never make it to clinical trials, but their scientists must still be paid for the work they have done.

The bottom line is PDPRA should not be debated over a course of a few hours and then voted on in committee.  CAGW thinks there is great promise in the Medicare Part D reform proposal, but the legislation is too overreaching to be pushed through at lightning speed without careful and thoughtful consideration by senators and input from policy experts that can provide their insight on the good – or harm – that may come from PDPRA.