May 13, 2021
During late April 2021, key members of the House Energy and Commerce (E&C) Committee introduced competing drug pricing bills. House E&C Chair Rep. Pallone’s bill (H.R. 3 - text, fact sheet) would aim to lower prices by requiring government negotiation of prescription drugs for public and private commercial payers, including employer plans, and drug manufacturers to lower prices or provide rebates for drugs whose price increases have outpaced inflation.
The second bill, introduced by House E&C Ranking Member Rep. McMorris Rodgers (H.R. 19 - text, summary, fact sheet), would ban some anticompetitive practices by manufacturers of brand drugs (e.g., pay-for-delay agreements), increase drug pricing transparency and modify drug payments under Medicare Part B. The bills lack bipartisan support yet represent the most comprehensive drug pricing proposals introduced during the 117th Congress. Key details of each bill are provided below.
By 2024, the bill would:
- Authorize the Department of Health and Human Services (HHS) Secretary to negotiate the price of prescription drugs with manufacturers for public and private commercial payers, including employer plans; specifically, single-source brand-name drugs, including those 250 drugs that account for the greatest national and Medicare spending and insulin.
- Allow private payers to opt out of negotiation. A list of plans not participating would be jointly disclosed by HHS and the Departments of Treasury and Labor.
- Require the HHS Secretary to negotiate the prices of newly approved drugs whose wholesale acquisition cost (WAC) is priced equal to or greater than the median U.S. household income.
- Establish a maximum price that consists of either 120% of the average international market (AIM) price (calculated by determining the average price in Australia, Canada, France, Germany, Japan and the United Kingdom) or 85% of the average manufacturer price (AMP).
- Assess drug manufacturers with escalating penalties if they fail to come to an agreement or violate the negotiated terms.
- Establish a government rebate program for drug prices that have grown greater than CPI-U (inflation in urban areas) since 2016 with certain exclusions, and by December 31, 2024, establish a rebate program for private payers.
- Establish a $2,000 out-of-pocket (OOP) limit in Medicare Part D.
- Increase price transparency of prescription drugs by requiring drug manufacturers to submit a detailed report to HHS when prices rise past certain thresholds. HHS will subsequently make some of the information public. The thresholds include:
- WAC of a drug rises by 10% or more in 1 year or 25% in 3 years beginning in 2021.
- Estimated price of the drug or spending per individual is at least $26,000 annually beginning on or after January 1, 2023.
- WAC of a drug rose more than 10% or more in 1 year or 25% in 3 years since 2018.
Similar to H.R. 3, H.R. 19 would implement drug pricing transparency if WAC of a drug rises by 10% or more in 1 year or 25% in 3 years beginning in 2021. H.R. 19 would also:
- Ban pay-for-delay agreements except in limited circumstances.
- Limit drug evergreening by restricting manufacturers from obtaining new exclusivities on previously approved clinical entities.
- Modify Part B payments for drugs by 2022 in the following ways:
- Encouraging the use of lower- cost Part B drugs by modifying payments to physician practices from 106% of average sales price (ASP) to a sliding scale reimbursing more for lower- priced drugs.
- Creating maximum add-on payments of $1,000 for most drugs and $2,000 for certain immunotherapies.
- Requiring site-neutral payments for administration of Part B drugs using the physician rate regardless of site of delivery.
- Add a statutory safe harbor for health savings account (HSA)-qualified high - deductible health plans (HDHPs) to cover insulin and insulin- delivery devices prior to the deductible. The current regulatory safe harbor is limited to insulin, not insulin delivery devices.
- Increase pharmacy benefit manager (PBM) transparency by:
- Requiring PBMs to disclose information to the HHS Secretary, including discounts, direct and indirect remuneration fees, administrative fees and price concessions. HHS would make information available to the public except for information on a specific drug or plan.
- Requiring the Federal Trade Commission (FTC) to study PBMs for potential anticompetitive behavior and determine whether there are legal or regulatory barriers that may be decreasing PBM competition.
The Business Group is monitoring drug pricing legislation and the potential impact for members. In their current form, it is unclear whether either bill would gain enough bipartisan support to pass during the 117th Congress.
We provide this material for informational purposes only; it is not a substitute for legal advice.