CBO: Pelosi drug plan saves $345B but could reduce flow of new drugs

An image of Nancy Pelosi standing at a podium wearing a red blazer.
House Speaker Nancy Pelosi's drug plan could lead to fewer drugs reaching the U.S. market over the long term, a CBO analysis said. Image: Getty images/Tom Williams/CQ Roll Call

House Speaker Nancy Pelosi’s drug prices plan would reduce Medicare spending by $345 billion over a seven-year period but could also impact the number of new drugs entering the market, according to an analysis from the Congressional Budget Office.

The analysis centers only on how the bill, which gives Medicare the power to negotiate lower drug prices, will save money on Medicare Part D. The bill would enable Medicare to negotiate for a lower drug price that is 120 times an average paid by other countries.

“The largest savings would come from the lower prices for existing drugs that are sold internationally, for which the price ceiling would be binding in most but not all cases,” said the CBO analysis, which was released late Friday.

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RELATED: House report: Pegging drug prices to those paid in other countries could save billions

Pelosi’s plan would also require drug companies to offer the negotiated Medicare price to commercial plans.

While CBO acknowledges that the bill could force drug companies to pull out of the U.S. market entirely, the nonpartisan congressional scorekeeper speculated that would be unlikely for all drugs being sold in the U.S.

“Manufacturers would initially set list prices of some new drugs in the U.S. higher than under existing law, although the net prices paid by consumers over time could be lower in many cases,” the CBO said.

RELATED: 340B allies rally Congress to ensure Pelosi drug price plan doesn't imperil discounts

However, CBO also estimates that any cut in manufacturer revenue “would result in lower spending on research and development and thus reduce the introduction of new drugs.”

That estimate would be welcome news to the pharmaceutical industry, which has said that Pelosi’s bill would stifle innovation. Impact on R&D funding is a common defense the industry uses to attack drug pricing policies.

CBO’s preliminary estimate said that a reduction in revenue of $500 billion to $1 trillion “would lead to a reduction of approximately eight to 15 new drugs entering the market the next 10 years.”

RELATED: Top Pelosi aide urges insurance industry to fight for drug prices plan, blunt opposition

The Food and Drug Administration on average approves about 30 new drugs a year, so CBO estimates that about 300 drugs might be approved over the next 10 years.

“The overall effect on health of families in the United States that would stem from increased use of prescription drugs but decreased availability of new drugs is unclear,” the agency added.

It remains unclear whether Pelosi’s bill would make it through Congress. Lawmakers return from a two-week recess on Tuesday and a top Pelosi health aide has said he expects the bill to be voted on by the end of the month.

But the bill is likely to face a steep challenge in the GOP-controlled Senate, where Majority Leader Mitch McConnell has called it a Socialist proposal.

However, President Trump has previously shown a desire to let Medicare negotiate drug prices and his administration has issued a proposal that would tie the prices for certain Medicare Part B drugs to those paid by other countries.

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