Could Pelosi’s Medicare Proposal Cut Drug Prices for All Americans? 

Nancy Pelosi in front of capitol building; Medicare negotiate drug prices

Another proposal is in the works to allow Medicare to negotiate drug prices with drugmakers. However, this proposal stands apart from previous attempts as it could extend drug discounts to Americans with private insurance as well. 

The proposal 

Speaker of the House Nancy Pelosi has spent months developing a new plan which would grant the Department of Health and Human Services (HHS) the power to negotiate drug prices with drugmakers. 

The negotiation would allow HHS to set a price range for drugmakers as well as a maximum amount manufacturers can charge for a drug. The initial proposal aimed to address the 25 most expensive drugs on the market, but House progressives encouraged Pelosi to expand the list to include 250 drugs. 

One concern was balancing the tasks of maximizing drug savings while also keeping the list short enough so as not to overwhelm HHS. Pelosi and fellow House Democrats believe they have reached that balance with this list. These 250 drugs account for about 78 percent of spending on prescription drugs, according to an analysis from the advocacy group Patients for Affordable Drugs.  

Although the official plan has not yet been released, part of the proposal includes taxing companies that refuse to comply with the negotiations. According to Kaiser Health News, these companies would be “slapped with an excise tax equivalent to 50% of sales on the drug in the previous year.”

How the current system works

Under the current system, pharmacy benefit managers (PBMs) act as middlemen between drugmakers and private insurance providers. When PBMs negotiate the price of an expensive, brand-name prescription drug and guarantee it will be covered by a drug plan, the PBM then receives large amounts of undisclosed money from the drugmaker in the form of rebates. These PBM rebates are also referred to as kickbacks. This system encourages drugmakers to keep prices (and profits) high. 

The Trump administration has proposed legislation that would require PBMs to pass any rebates larger than 30 percent of the drug’s listed price on to consumers at the pharmacy counter, potentially saving consumers enormous out-of-pocket costs. 

Senate Republicans have already said they would not allow Pelosi’s bill to advance, making it essentially dead on arrival. 

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