Democrats in Congress have made a big, if substantially pared back, step toward lowering prescription drug costs for older Americans, reaching a compromise on the matter after significant in-fighting on the issue.
The move is part of President Biden’s Build Back Better social spending plan, which Democrats are still negotiating.
The agreement announced Tuesday would allow Medicare Parts B and D to negotiate prices directly with drug manufacturers on certain drugs and cap out-of-pocket spending for seniors at $2,000 per year, the first innovation of its kind in the program’s history.
“Fixing prescription drug pricing has consistently been a top issue for Americans year-after-year, including the vast majority of both Democrats and Republicans who want to see a change because they simply cannot afford their medications,” Senate Majority Leader Chuck Schumer, D-N.Y., said in a statement.
“We’ve heard this from people across the country who have serious illnesses and can’t afford their medicine. What a painstaking position to be in. It’s horrible.”
Schumer noted that many lawmakers would have wanted to go further but still called the deal a “big step in helping the American people.”
Under existing rules, Medicare Part D enrollees pay 5% of their total drug costs after reaching a certain threshold under what is called the “catastrophic” clause of the outpatient prescription drug agreement. It is meant to help patients with billowing drug bills avoid financial ruin.
The 2021 threshold is currently set at $6,500 for out-of-pocket drug costs, a number that activists in the health care space argue is too high and can still be detrimental to low- and middle-income Americans, for whom the program is designed.
The White House in a Tuesday evening statement praised the compromise, calling the ban on direct negotiations between Medicare and drug makers an “unfair prohibition” that hurt American seniors. The statement also hailed a provision in the agreement that would cap insulin prices for diabetics at $35 a month.
Advocates’ reactions to the news
AARP, which advocates for seniors and has called for new policies, applauded the deal on Tuesday and called on lawmakers to pass the legislation.
“Allowing Medicare to finally negotiate drug prices is a big win for seniors,” CEO Jo Ann Jenkins said in a statement. “Preventing prices from rising faster than inflation and adding a hard out-of-pocket cap to Part D will provide real relief for seniors with the highest drug costs.”
The new proposal also includes a tax penalty for drug companies that increase their prices at a rate greater than the national inflation.
PhRMA, which represents pharmaceutical companies, said the plan “threatens innovation.”
“Under the guise of ‘negotiation,’ it gives the government the power to dictate how much a medicine is worth and leaves many patients facing a future with less access to medicines and fewer new treatments,” President and CEO Stephen J. Ubl said.
Winning over holdouts
The original, more expansive iteration of the bill — passed twice by the U.S. House — had been stymied in the Senate by some key Democrat holdouts, including New Jersey Sen. Bob Menendez, whose state is home to a number of drug manufacturers, and most notably, Sen. Kyrsten Sinema of Arizona.
Sinema, who has remained tight-lipped to the media about her demands on Democrats’ multitrillion-dollar budget plan, had publicly argued that the original $3.5 trillion price tag was too high. Her resistance to a more substantial package drew considerable ire from Democrats, who need full cooperation within the party to move forward on the proposal.
But in a Tuesday statement, Sinema’s office said she was gratified that an agreement had been reached on drug pricing.
“After Senator Sinema reached earlier agreement with President Biden to include historic Medicare drug negotiation in the reconciliation package — policies that were omitted from the initial framework at the request of members of the U.S. House — Speaker Pelosi reached out to Senator Sinema this past weekend to continue negotiations,” John LaBombard, communications director for her office, said in a statement.
“The Senator welcomes a new agreement on a historic, transformative Medicare drug negotiation plan that will reduce out-of-pocket costs for seniors — ensuring drug prices cannot rise faster than inflation — save taxpayer dollars, and protect innovation to ensure Arizonans and Americans continue to have access to life-saving medications, and new cures and therapeutics.”
House Speaker Nancy Pelosi, with whom Sinema had engaged negotiations on the topic, said she was “pleased” to have reached a compromise.
“For a generation, House Democrats have been fighting to deliver real drug price negotiations that will lower costs. With today’s agreement on strong lower drug price provisions for the Build Back Better Act, Democrats have a path forward to make good on this transformational agenda for our seniors,” Pelosi said in a statement.
“We are now finishing the drafting of the legislative text to reflect this important agreement. I am pleased with the compromise reached by House Members and Senator Sinema.”