As Congress prepares to debate limits on prescription drug costs as part of a massive spending bill, President Joe Biden reiterated his support for proposals that would allow the federal government to directly negotiate Medicare's prices with pharmaceutical companies.
The odds of such a proposal being enacted remain long, however, as differences may be emerging between legislation in the House and Senate that would need to be worked out before a bill could reach Biden's desk. Strong opposition from pharmaceutical manufacturers and thin Democratic majorities in both chambers will also make it an uphill battle, as will the White House's need to work with drugmakers to address the COVID-19 pandemic.
Already, drugmakers are escalating their rhetoric against price negotiation proposals, which the industry has successfully beaten back before. Such legislation is a "smokescreen for implementing new government price controls," Eli Lilly CEO David Ricks, who is also chairman of the industry group PhRMA, said in a press conference this week sponsored by the lobby. "The price controls and formulary restrictions that are being talked about have been implemented elsewhere, and the end of the story is clear: that it results in a delay in new innovation coming to the market."
A recent Congressional Budget Office report estimated that a 15% to 25% reduction in the expected profit of top-earning drugs would lead to a 0.5% reduction in the number of new drugs introduced to the market after 10 years, a number that would rise to 8% after 30 years, because it would limit drugmakers' research and development budgets.
Whether such a reduction, if realized, would be significant to clinical care and patient health, however, is much less certain, particularly as some new drugs that win approval work similarly as those before them.
Biden doesn't have the power to implement drug price negotiation. However, the plan he unveiled Thursday was aimed at encouraging action in Congress, which is expected in coming days.
The tax-regulating House Ways and Means Committee is preparing to vote on a bill requiring that 125 brand-name drugs that account for the greatest amount of Medicare spending be subject to negotiation, with a cap on the price set at 120% of the average price paid in six other countries. A similar bill passed the House in 2019, but with Democrats then in the minority in the Senate, it didn't advance further.
With Democrats in the majority in both chambers, legislation to control drug costs has a better chance of passing than it did in 2010 and 2020, but Medicare price negotiation probably won't be able to overcome Senate opposition, Rick Weissenstein, an analyst at Cowen, wrote in a Sept. 7 note to clients.
Weissenstein noted that Senate Finance Committee Chair Ron Wyden, a Democrat from Oregon, is reportedly developing an alternative proposal that would allow the government to negotiate prices for drugs that have been on the market for years but haven't seen price reductions, a concept that could be more acceptable to the pharma sector.
Other parts of Biden's plan could gain more support and be part of a final spending package that reaches his desk, Geoffrey Porges, an analyst at SVB Leerink, wrote in a Sept. 10 note. Many of these have been part of legislative proposals in the past.
The ones more likely to pass, Porges said, include limitations on drug price increases — a concept that gained Republican support in a committee vote in 2019 — as well as bans on "pay-for-delay" deals between branded pharmaceutical companies and generic drugmakers that keep generics off the market past patent expirations.
A proposal similar to the "pay-for-delay" ban that Biden included will probably gain more industry opposition, however, Porges added. That proposal is to shorten the period of market exclusivity, a concept that has gained support given the longevity of patent protection for expensive biologic drugs like AbbVie's Humira and Amgen's Enbrel.
The Biden plan also includes some popular concepts, such as further limits on Medicare beneficiaries' out-of-pocket outlays. It wouldn't, however, mandate any changes to or bans on rebates to Medicare drug plans from pharmaceutical companies, as past legislative proposals have included. The plan asks the Department of Health and Human Services to collect data to improve transparency around rebates and out-of-pocket spending.
The Pharmaceutical Care Management Association, which represents pharmacy benefits managers, said it is "aligned with the Biden administration on the importance of transparency."