Blocked from boosting revenues through enhanced Internal Revenue Service enforcement, congressional Democrats are turning to reducing drug spending as a possible way to salvage their $600 billion bipartisan infrastructure deal.
Negotiators are looking for billions of dollars in revenue for the infrastructure package now that Republicans have nixed the idea of bolstering the IRS, which lawmakers have suggested could bring in as much as an additional $100 billion over a decade.
One solution may be the repeal of a late 2020 Trump administration rule that would radically change how drugs are priced and paid for in Medicare and Medicaid. It would save an estimated $200 billion, according to sources. However, the White House wants to use the measure in the Senate Budget Committee’s $3.5 trillion spending plan, while Republicans are open to using this as part of the bipartisan deal. Talks continue on this point, sources said.
The controversial rule, which the Trump administration unveiled in November, would effectively ban drug makers from providing rebates to pharmacy benefit managers and insurers. Instead, drug companies would be encouraged to pass the discounts directly to patients at the pharmacy counter.
The Department of Health and Human Services said that patients may be able to save nearly 30% — those with high medication costs would particularly benefit. The measure stemmed from an executive order former President Donald Trump issued last summer.
The Trump administration had backed down from issuing this rule in 2019 after it was found to raise costs for seniors and the federal government. The proposed rule, which was expected to raise Medicare premiums, would also have increased Medicare spending by $170 billion over 10 years, according to the Congressional Budget Office.
The Biden administration agreed in February to push back the implementation of the rule until 2023, instead of 2022.
The Pharmaceutical Care Management Association, which represents pharmacy benefit managers, sued the Trump administration to stop implementation of the rule. The group, along with America’s Health Insurance Plans, argue that it would benefit drug manufacturers.
Repealing the rule could save the government a lot of money, said Stacie Dusetzina, associate health policy professor at Vanderbilt University Medical Center.
“The rebates rule is not a great policy,” she said. “Seeing it scrapped in favor of supporting some other policies is probably the best case scenario.”
The importance of drug pricing legislation
Drug pricing plays a central role in Democrats’ plans to pay for their massive proposals. The party is also eying allowing Medicare to negotiate drug prices as a way to help fund the expansion of Medicare benefits to include vision, dental and hearing services in the $3.5 trillion spending plan.
That proposal would likely have to go through Congress via the reconciliation process, which would make the negotiation measure easier to pass since it would not need any GOP support. However, even getting all 50 Democratic senators to agree to allow Medicare to negotiate prices will face many hurdles.
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