House Drug Pricing Proposal Released; Surprise Billing Legislation Stalls

King & Spalding

On September 19, 2019, House Speaker Nancy Pelosi (D-CA) released H.R. 3, the Lower Drug Costs Now Act, to make a series of changes to Medicare to lower the price of prescription drugs. The bill must move through three committees - Energy and Commerce (jurisdiction over Medicare Part D and Medicaid); Ways and Means (jurisdiction over Medicare Part A and Part C); and Education and Labor (jurisdiction over ERISA/commercial markets) - before proceeding to the floor for a vote.

The legislation has four components:

  • Direct federal pricing negotiations for a) insulin or b) at least 25 - and up to 250 - of the most expensive Medicare Part B and Part D drugs (which do not have generic competition) per year. Negotiated prices would be available to all payers, including the commercial market. A drug selected for negotiation would remain subject to annual negotiation until competition enters the market.
  • Inflation caps on all Part B and Part D drug prices. If a manufacturer has raised the price of a drug in Part B or Part D above the rate of inflation since 2016, the company must either lower the price to or pay the entire price above the inflation in a rebate back to the U.S. Treasury.
  • Cap Part D out-of-pocket costs for seniors and individuals with disabilities. The bill would create a $2,000 annual out-of-pocket cap for Medicare beneficiaries, eliminating the “donut hole” entirely.
  • Reinvestment of savings from the bill into research and development for new treatments and cures, as well as into Medicare benefit expansion (vision, dental, etc.).

Rep. Kevin Brady (R-TX), the most senior Republican on the Ways and Means Committee, issued a press release stating: “[w]hile I’m confident Congress can work together to lower out-of-pocket drug costs for seniors and modernize the popular Medicare prescription drug program, this so-called government negotiation idea is more accurately a 'dictate or destroy' price control power that will halt valuable research into new life-saving medicines and give foreign countries dangerous influence over America’s health care system."

The Energy and Commerce Health Subcommittee has scheduled a hearing on the bill on September 25. The Ways and Means and Education and Labor Committees are expected to hold hearings on portions of H.R. 3 under their jurisdiction. With Congress scheduled to be in recess between September 27 and October 14, full Committee action before the three Committees is expected to occur the third or fourth weeks of October. H.R. 3 is likely to pass the House, but real legislative discussions will begin once the Senate determines its position on drug pricing.

President Trump’s position will have a substantial impact on outcome of H.R. 3 in the Senate; unless he supports Speaker Pelosi’s approach, there is little chance the bill could get through the Senate. Senate Republicans are not enthusiastic about the bipartisan legislation approved by the Senate Finance Committee. Senate Finance Committee Democrats are supporting this bipartisan legislation and have not indicated support for provisions of H.R. 3. President Trump has tweeted that he liked Senate Finance Committee Chairman Grassley’s (R-IA) bill “very much,” but he also tweeted it was “great to see” the Speaker’s bill, urging a bipartisan approach.

Surprise Billing

As a result of extensive lobbying and advertising stemming from a significant disagreement within the healthcare industry, legislation to address “surprise” medical bills may now have little chance of enactment. Before the August congressional recess, House and Senate Committees with lead jurisdiction over the issue had each passed bipartisan legislation in response to consumer outcry that consumers have had to pay the balance when they inadvertently received care from an out-of-network provider. The Senate Health, Education, Labor, and Pensions (HELP) Committee approved S. 1895, the Lower Health Care Costs Act. Title I of this legislation addresses surprise medical billing and would include benchmark payments provision, under which health insurers would pay providers the median in-network contracted rate in the geographical area where care is provided. The House Energy and Commerce Committee amended and approved H.R. 3630, the No Surprises Act, which contained a similar benchmarking approach, with a bipartisan compromise “backstop” to allow a physician to appeal to an arbitrator. When Congress returned from its August recess, the expectation was that the House Education and Labor Committee would hold a hearing on surprise billing provisions under its jurisdiction (ERISA plans), and both chambers were expected to move forward with legislation. However, that hearing, and further action on surprise billing, has been stalled.

Opposition to setting benchmark rates was strong, and over the August recess, a so-called “dark-money” group called Doctor Patient Unity invested $27.5 million in advertising to counter the benchmark proposal and argue that arbitration was the only fair way to settle these disputes. In a last-minute lobbying push at the end of August, emergency physicians met with congressional staff, to urge the Senate to add an independent dispute resolution provision to S. 1895. Emergency physician advocates argued that a rate-setting approach alone would harm physicians’ leverage in price negotiations, drive smaller physician groups out of business, and result in hospital closures.

It was revealed that two physician staffing firms were the major funders of the Doctor Patient Unity group, and on September 16, House Energy and Commerce Chairman Frank Pallone (D-NJ) and ranking member Greg Walden (R-OR) sent letters to private equity firms that own physician staffing companies.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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