The House of Representatives will soon vote on House Speaker Nancy Pelosi’s bill to allow Medicare to directly negotiate drug prices with pharmaceutical manufacturers. These negotiations would nearly halve the price of 250 of America’s most commonly prescribed drugs. However, the bill was recently expanded to provide Medicare beneficiaries with dental, vision, and hearing coverage as well.
The nonpartisan Congressional Budget Office has estimated the Pelosi drug bill would save the government approximately $500 billion over 10 years, which has been pledged to go toward new Medicare benefits and research efforts with the National Institutes of Health (NIH).
Representatives Frank Pallone (D-NJ), Richard Neal (D-MA), and Bobby Scott (D-VA) said in a joint statement, “These significant investments are made possible as a result of our promise to finally empower the federal government to negotiate lower drug prices for the American people.”
What the plan includes
The plan will establish an international pricing index, which prices drug according to those set by other countries for the same drug. Drug companies that refuse to negotiate with the Department of Health and Human Services (HHS) and lower their prices would be penalized.
The penalty would start at 65 percent of the company’s gross profits on the drug which has not been discounted, and be increased by 10 percent each quarter that the price is not lowered. For example, if the drug company makes $1 million in profits on a single drug which has not been reduced in price, the company would be fined $650,000 in the first quarter and increase by 10 percent in each consecutive quarter.
A significant aspect of this bill is that it will benefit more than just people with Medicare drug coverage. The prices Medicare negotiates with drug companies will also extend to Americans with private insurance plans.
The plan would also:
- Penalize drug companies that raise the prices of their drugs faster than the rate of inflation;
- Cap out-of-pocket drug costs for Medicare beneficiaries at $2,000;
- Reinvest savings into research and development at the NIH; and
- As of early December, include much-needed dental, vision, and hearing coverage for Medicare beneficiaries.
Will the bill pass?
While the Pelosi bill is expected to easily pass in the House, it has no chance of passing in the Senate, where the GOP majority has historically voted against bills that could lower drug prices as they believe the free market will accomplish this. Additionally, Trump will likely request the Senate kill the bill as he continues to go head-to-head with Pelosi over public impeachment battles.