Senate Legislation

In the Senate, three committees have passed legislation containing drug pricing provisions. Senate leaders have expressed interest in combining the provisions into one bill to be considered in the fall. The Prescription Drug Pricing Reduction Act, passed by the Senate Finance Committee on July 25, 2019, includes a redesign of the Medicare Part D drug benefit intended to reduce beneficiary out-of-pocket costs as well as controversial provisions labeled by several Committee Republicans as "price controls." The bill would require drug manufacturers that increase the price of a drug faster than the rate of inflation to pay rebates to Medicare. Several provisions would have significant implications for Medicare payments to hospitals, such as by capping the add-on payment hospitals receive for drugs and removing grandfathered status for hospital clinics that are not currently subject to reduced "site neutrality" payments. While nine Committee Republicans voted against the bill, in part due to the controversial rebate provisions, the bill ultimately passed by a 19-9 vote.

The Lower Health Care Costs Act, passed by the Senate Health, Education, Labor and Pensions (HELP) Committee on June 26, 2019, addresses health care costs more broadly, but includes provisions to increase prescription drug competition and promote the use of biosimilars. The bill also targets PBMs and certain pricing strategies and adds a number of pricing and transparency requirements. The Committee expressed interest in addressing the 340B drug pricing program in the health costs bill, including possible requirements for hospitals to report information to the government to improve program transparency, however, the final version did not include the 340B provisions. The HELP Committee bill passed by a vote of 20-3.

The Administration also continues to raise questions about the 340B program, particularly related to hospital participation. The Health Resources and Services Administration (HRSA) continues its push to increase oversight of 340B providers, including through audits and clarifications to compliance expectations. The Administration has also expressed interest in proposing changes to program rules that could restrict access to 340B savings.

The Senate Judiciary Committee also passed four bills in June that seek to promote greater market access and certain behavior by both drug manufacturers and PBMs, which are intended to reduce drug prices. 

House Legislation

Senate Republicans are reportedly negotiating with House Democrats, who have yet to move forward with their own drug pricing plan. Democratic leadership in the House has indicated plans to release a proposal in the second or third week of September for consideration by the relevant committees. Floor action is not anticipated before October. Progressive House Democrats have been pushing for any measure considered in the House to allow Medicare to negotiate drug prices with manufacturers, which Republicans strongly oppose. It has been reported that the anticipated legislation may allow Medicare negotiation, with an arbitration process backstop in cases where drug companies and the government cannot agree to a price. Senate Republicans are likely to strongly oppose such a proposal.

Administration Policies

The Administration continues to pursue policies to address high drug prices, following the release in May 2018 of a Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs. The Department of Health and Human Services (HHS) has faced a series of setbacks since the release of the blueprint. A federal district court blocked a regulation requiring manufacturers to disclose prices in drug advertisements. The government has appealed the decision. The Administration also withdrew a proposal to prohibit drug manufacturers from paying rebates to PBMs. Some observers indicated that the policy could have increased patient out-of-pocket costs.

HHS continues to tout an impending proposed rule to test major changes in how Medicare Part B drugs are bought and paid for. In October 2018, HHS issued an advanced notice of proposed rulemaking, which included a possible demonstration to test paying for Part B drugs based on prices in other countries, referred to as the International Pricing Index (IPI) Model. Importantly for hospitals and physicians, drugs would be purchased under the model by third-party vendors that would negotiate prices directly with manufacturers, taking the buying and billing of drugs away from providers. Providers expressed significant concern about the model, and it received a mixed reception in Congress. Some lawmakers expressed openness to fundamental changes to the "buy and bill" system and support for tying payments to international prices. However, many Republican lawmakers, as well as the drug industry, strongly opposed the model. Nevertheless, the Administration continues to indicate interest in formally offering the model in a proposed rule.