Battle brews over cap on drug prices in Biden’s bill
Business groups are locked in a lobbying battle over provision
WASHINGTON — Workers and families with private health insurance would reap savings on prescription drugs from a little-noticed provision in President Joe Biden’s sweeping social agenda bill. It’s meant to break the cycle of annual price increases for widely used medicines.
That provision would require drug companies to pay rebates to Medicare if they increase prices above the rate of inflation. Drugs sold to private plans would count in calculating the penalty, like a tax on price increases. The issue is dividing business groups in a fierce lobbying battle.
Corporate groups focused on affordable employee benefits want to keep the language as is so it would provide price-increase protection for companies and their workers and not just Medicare enrollees. Other groups, such as the U.S. Chamber of Commerce, are backing the pharmaceutical industry’s drive to block restraints on pricing, including inflation caps, saying they would stifle innovation.
House Democrats passed the roughly $2 trillion social agenda legislation on Friday and sent it to the Senate. The bill resets national priorities on issues from climate to family life and faces more scrutiny in that evenly divided chamber. Prescription drugs are but one component, and most of the attention has focused on Medicare provisions to slash out-of-pocket costs for seniors and allow the program to negotiate prices for a limited number of medicines.
But the inflation caps would have far-reaching impact for as many as 180 million Americans with private insurance.
“A lot of people don’t realize that the bill applies to, and will help, privately insured people,” said Shawn Gremminger, health policy director at the Purchaser Business Group on Health. “But that isn’t a sure thing. As currently structured, that would be the case. But we have been worried and continue to be worried that will change.” His coalition represents nearly 40 large employers that cover more than 15 million workers, retirees and their families.
Polls show that Americans across the political spectrum overwhelmingly favor government action to reduce drug prices. The chief cost complaints are: high out-of-pocket costs for patients, high and rising list prices, and high launch prices for new medicines. The Biden package would tackle the first two issues, but Democrats were unable to agree on authorizing Medicare to negotiate prices of new drugs.
Annual price increases for established prescription drugs usually outpace inflation, although there have been periods of moderation in recent years.
Gremminger said his group estimates that the privately insured market could save $250 billion over 10 years under the inflation caps currently in the bill.
The main drug industry lobbying group, the Pharmaceutical Research and Manufacturers of America, says inflation rebates would undermine innovation that continues after medicines are approved. The generic drug industry wants their products exempted. Dan Leonard, president of the generic lobbying group Association for Accessible Medicines, said he fears his members will be penalized for price increases that amount to pennies on the dollar. “When generics are not exempted ... they’ll get caught up in the jet wash,” he said.
In the Senate, Finance Committee Chairman Ron Wyden, D-Ore., who has taken a lead role on prescription drugs, supports keeping the inflation caps for privately insured people.
Opponents could pursue a parliamentary challenge under Senate rules, arguing that penalizing price increases by one private company on another has no bearing on federal budgetary issues. If the challenge succeeds, costs to private insurance plans would be stripped from the inflation rebates. Supporters of the caps say they do have a budgetary purpose because they would raise revenue and generate savings for Medicare.
Katie Mahoney, the top health policy expert for the U.S. Chamber of Commerce, said her organization has “very real concerns” that the drug pricing provisions would undermine incentives for the industry to develop new medicines, and is pressing that point in the Senate.
“We continue to hammer on the damage that such policies would do,” she said. “We feel that message is making headway with senators and with some members of Congress.”
Asked about other business groups that are supporting inflation caps, Mahoney said they don’t reflect private enterprise generally.