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  • Washington Highlights

    Senate Finance Committee Advances Legislation to Reduce Prescription Drug Costs

    Jason Kleinman, Senior Legislative Analyst, Govt. Relations

    The Senate Finance Committee July 25 held a markup of the Prescription Drug Pricing Reduction Act of 2019 (PDPRA), a bipartisan proposal introduced by Committee Chair Chuck Grassley (R-Iowa) and Ranking Member Ron Wyden (D-Ore.) to lower the price of prescription drugs. The committee advanced the legislation to the Senate floor, 19-9, with nine Republicans voting in opposition.

    The major proposals in the Chairman’s mark would:

    • Redesign the Medicare Part D benefit to create an out-of-pocket cap on beneficiary spending while changing the respective payment obligations of the government, plans, and manufacturers;
    • Introduce rebate penalties in Medicare Parts B and D when the list price of any drug increases by more than inflation;
    • Alter Medicare Part B drug payment policies to revise the calculation and reporting of Average Sales Prices (ASP); and
    • Ban spread pricing in Medicaid and modify the maximum rebate amount under the Medicaid Drug Rebate Program.

    Also included is a proposal that would modify current law in the Bipartisan Budget Act of 2015 (P.L. 114-74) and the 21st Century Cures Act (P.L. 114-255) that allows certain off-campus hospital outpatient departments to continue to bill Medicare under the outpatient prospective payment system (OPPS). The PDPRA would eliminate this “grandfathered” status and require that payment for Part B drug administration be made at the Medicare Physician Fee Schedule rate rather than the OPPS rate, beginning Jan. 1, 2021.

    Another section in the PDPRA would establish a maximum add-on payment of $1,000 for separately paid Medicare Part B drugs. Under current law, Medicare pays separately paid Part B drugs at ASP plus 6%. The provision would pay the provider the lesser of the current applicable add-on payment or $1,000.

    The AAMC, the American Hospital Association, and the Federation of American Hospitals sent a joint letter to Sens. Grassley and Wyden expressing concern about these provisions. The letter notes, “We oppose any expansion of site-neutral payment policy, including imposing a site-neutral payment policy for drug administration services under Medicare Part B.”

    During his opening statement, Sen. Grassley mentioned that the White House “threw us a curveball” by not finalizing its proposed rule to pass drug discounts directly on to patients at the point of sale [see Washington Highlights, Feb. 1]. He stated that he wants to include a version of the rebate rule in the committee’s final package. Grassley also added his opposition to tying drug prices to international drug prices because of a concern that it could have unintended consequences that could lead to the loss of innovation.

    Sen. Wyden laid out his next steps in considering the proposal, stating, “Democrats will not begin floor debate on this proposal until it is clear that amendments on two issues — preexisting conditions and negotiating power Medicare — will get votes on the Senate floor.”

    Both Grassley and Wyden highlighted an estimate from the Congressional Budget Office (CBO) that found the PDPRA would save over $100 billion between 2019-2029. The CBO noted the combination of the Medicare Part D redesign and the creation of price inflation penalties in Medicare Parts B and D will result in $85 billion in federal budget savings over ten years ($35 billion and $50 billion, respectively). The Part D redesign and lower drug price inflation will save beneficiaries $27 billion in out-of-pocket costs and $5 billion in premiums. Additionally, the Medicaid provisions will produce $15 billion in savings while the reduced price inflation would reduce costs for prescription drug benefits offered by commercial insurance plans.

    The committee rejected two amendments from Sen. Pat Toomey (R-Pa.) that would remove the Medicare Part D inflation penalties and bar the government from establishing an international pricing index for certain Medicare Part B drugs. The committee also failed to pass an amendment from Sen. Debbie Stabenow (D-Mich.) to allow Medicare to directly negotiate drug prices with manufacturers.

    The Campaign for Sustainable Rx Pricing, of which the AAMC is a member, issued a release commending the committee on taking positive first steps to lower prescription drug prices, including “bipartisan work to keep the growth of prescription drug prices in line with inflation, boost list price transparency, support increased utilization of biosimilars and deliver relief for Medicare Part D beneficiaries.”

    Following the markup, White House Deputy Director Judd Deere noted the administration’s support of the PDPRA via Twitter, stating, “We will continue to work with Senators to ensure this proposal moves forward and advances the President’s priority of lowering drug prices even further.”