Democrats will have to limit their drug pricing reforms to Medicare

Democrats will have to limit their drug pricing reforms to Medicare

WASHINGTON — Democrats will likely have to ax two provisions from their drug pricing plan to fit in with Senate rules, both of which would have brought down drug prices for people who get health insurance through their jobs.

Democrats had hoped to cap insulin costs for patients with employer-sponsored health insurance in the massive climate, tax and health bill they’re hoping to advance as soon as this weekend. They also wanted to protect the same pool of people, who get health insurance through their jobs, from bearing the brunt of future drug price hikes.

But the Senate’s rules referee said early Saturday that neither would be allowed under the complicated rules that govern the fast-track process Democrats are using to pass the package without Republican support, according to both public statements and a Senate aide who shared further details.

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The parliamentarian also ruled that Democrats have to tweak an enforcement mechanism for their Medicare negotiation process, a separate Senate aide said, but it likely won’t have much practical impact.

The changes likely won’t affect Democrats’ unanimous support for the bill, but they significantly narrow the number of people who will actually benefit from the prescription drug pricing reforms. The Senate is planning to begin voting on the package as soon as Saturday. Now, the package will likely only lower drug prices for people who are covered by Medicare.

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The narrowing of the package is a mixed bag for the pharmaceutical industry, which has been lobbying hard to try to convince Democrats to oppose it. They are staunchly against the broadest reform in the bill, its mechanism for allowing Medicare to negotiate drug prices. They also opposed the way Democrats had hoped to protect commercially insured patients from price hikes, but capping patients’ out-of-pocket costs for insulin would have been good for the industry.

Here’s a summary of the changes to Democrats’ drug pricing proposal.

Penalties for price hikes

Democrats originally engineered their penalties for drugmakers that hike prices quickly to try to mitigate the effects on the private insurance market, but their solution didn’t fly with the parliamentarian.

Employers had been concerned that if Congress suppressed prices and price growth in Medicare, drug makers would simply inflate costs in the private sector to make up for the difference.

To minimize that possibility, Democrats crafted a formula that incorporated the prices of drug units sold in the private sector to determine how much of a penalty drug makers would have to pay if they hiked prices faster than inflation.

However, the parliamentarian ruled that strategy wasn’t allowable under the rules, and the policy will have to be limited to drugs sold to Medicare patients.

Insulin cost caps

Democrats’ last-ditch efforts to salvage some insulin pricing policy this week had mixed success—they managed to insert insulin cost protections that would cap the drug’s price at $35 per month for Medicare patients. But the parliamentarian ruled against a separate policy that aimed to cap the price for patients in the private insurance market, a Senate aide said.

The commercial market out-of-pocket cap was disallowed because it didn’t have enough of an effect on the federal government. It’s unclear whether Democrats will remove the commercial market insulin cap from the legislation themselves, or force a vote on the Senate floor.

The failure to provide any relief for diabetes patients outside of Medicare would be the latest blow to Democrats’ dizzying strategy to try to get something to show for themselves on insulin pricing, the poster child for perverse pricing incentives, before the midterm elections.

Moderate Democrats, including Sen. Kyrsten Sinema (D-Ariz.), have been pushing to cap insulin costs at $35 per month for patients with private insurance for months, including in an earlier reconciliation effort last fall. After that iteration went up in flames, Sen. Raphael Warnock (D-Ga.) introduced the insulin cost caps as a standalone bill.

But to advance the insulin cap on its own, supporters would have to garner the support of Republicans in the Senate. And though Republicans have supported caps on out-of-pocket costs before, it became clear that they likely couldn’t stomach giving a political win to the most vulnerable Democratic senators in an election year.

Instead of forcing Democrats to vote on Warnock’s bill, Senate Majority Leader Chuck Schumer (DN.Y.) decided to pivot and bless negotiations between Senate Diabetes Caucus Co-Chairs Susan Collins (R-Maine) and Jeanne Shaheen (DN.H.) , who came up with a different way to try to kidney in insulin costs.

But that measure failed to gain sufficient support, too, so Democrats turned to a last-ditch effort to cram as much insulin policy as they could into their reconciliation bill to work around Republicans’ opposition.

excise tax

Democrats’ Medicare negotiation process for prescription drugs survived mostly intact, except for a tweak to the enforcement mechanism to force drug makers to comply.

The original policy was structured as an excise tax on drug makers who didn’t cooperate that over time could rise to 95% of a drug’s sales. However, congressional budget analysts had predicted that the tax wouldn’t actually generate any new money for the government, as a drug maker would almost certainly rather remove their drug from the Medicare program than pay the tax.

Democrats had to allow drug makers that refuse to sell drugs to Medicare at negotiated prices sidestep the big tax penalty — but they’d have to pull all of their drugs out of the program, according to a Senate aide.

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