Comparing the Two Main Prescription Drug Pricing Reduction Proposals

It seems like the Senate may—if Majority Leader Mitch McConnell (R-KY) does his job—be able to debate and vote on the Prescription Drug Pricing Reduction Act (PDPRA) of 2019 this Fall.

Not to be confused with the Prescription Drug Price Relief Act of 2019, which was introduced by Senator Bernie Sanders (D-VT), in January (and which gained little support), the PDPRA was a bipartisan piece of legislation, sponsored by Senate Finance Committee Chairman Chuck Grassley (R-IA) and Ranking Member Ron Wyden (D-OR). The full text is not yet available; PDPRA was created as a chairman’s mark, and has not been formally introduced (or available on the Congress.gov site). Interestingly, the bill was able to fend off attempts by other Republican members, notably by Senator Pat Toomey (R-PA), to defang it through the amendment process. On July 25, 2019, the proposal was passed by the Senate Finance Committee, with several reimbursement-based methods for improving utilization of biosimilars. This includes boosting the add-on payments for new biosimilars.

On September 19, 2019, Speaker Nancy Pelosi (D-CA) introduced the long-awaited House of Representative’s proposal (in outline form). The two bills contain several of the same provisions (see the Table) and may well set up a consensus around the final legislation, if passed in both chambers. However, the House bill does not offer incentives for increasing biosimilar uptake.

TABLE: Summary of Main Provisions of Drug Price Reduction Proposals

  PDPRA Speaker Pelosi’s Proposal*
Breadth Medicare only Medicare and Commercial
Use Medicare International Price Index? Yes Yes, as maximum negotiated price
Negotiated Drug Prices No Applies to up to 250 drugs (min, 25) that lack competition (including insulins); refusal to negotiate incurs penalties up to95% of previous year’s gross sales of drug
Penalties for Price Increases Above Inflation Retroactive rebate on Part B drugs (not biosimilars) that have raised prices above inflation, beginning January 2021; mandatory rebates on branded Part D drugs with price increaseshigher than inflation Retroactive rebate on all Medicare Part B and D drugs that have raised prices above inflation since 2016
Limits on Medicare Pharmaceutical Cost Sharing $3,100 Out-of-pocket limit on drug costs for Medicare beneficiaries $2,000 Out-of-pocket limit on drug costs for Medicare beneficiaries
Biologic Reimbursement Establish a WAC add-on payment of up to ASP + 3% when ASP has not yet been established; biosimilars would be paid the lesser of WAC + 3% or ASP + 6% of the reference product No provisions
Biosimilar Incentives Add-on payment for Part B biosimilars would now be ASP + 8% for first 5 years of sale No provisions
Other Significant Provisions Exclude patient assistance coupon value from Medicare ASPcalculations Not addressed
  Require drugmakers withoutMedicaid drug rebate agreements to report quarterly ASPs to HHS, on which reimbursements will be based Not addressed
  Require refunds be paid to HHS on any single-dose vial Part B drugs for unused amounts that exceed a threshold Not addressed
  Maximum ASP plus add-on payment that a provider may receive per year administering one drug is $1,000 Not addressed
  Website publication of aggregate price concessions (including rebates and discounts) on Part D drugs Not addressed
  Require manufacturer justification (publicly posted) for price increases based on certain minimums and thresholds Not addressed
*Based on Proposal Outline, as of Sept 19, 2019.

Although President Trump has indicated support for the overall theme of drug pricing reduction, he has not endorsed either bill or its specific combination of actions. The Republican opposition to the Senate’s PDPRA is likely to be heavy, and Senate GOP opposition to Speaker Pelosi’s bill will also be a difficult barrier, even without the President’s support.

If both bills can make it to the conference stage, the Administration may be able to claim that it has delivered on one of its campaign promises. Otherwise, the drug pricing reduction proposals will result in another dead end, similar to the drug rebate safe harbor appeal and drug patent reform.

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