The Senate Finance Committee has finally unveiled its long-awaited legislation on drug prices, and the bill includes a slew of changes across Medicare and Medicaid.
The Prescription Drug Pricing Reduction Act (PDPRA) was introduced Tuesday by Sens. Chuck Grassley, R-Iowa, and Ron Wyden, D-Oregon.
Central to the bill is a significant overhaul to the Part D benefit design. The update would nix Part D’s existing coverage gap—also known as the “donut hole”—and would instead have plan members pay 25% of their drug costs after meeting their deductible. A beneficiary would enter catastrophic coverage once he or she meets an indexed threshold in out-of-pocket costs (estimated to be about $3,100 in the first year).
“The cost of many prescription drugs is too high,” Grassley and Wyden said in a joint statement. “Without action, we’re on an unsustainable path for taxpayers, seniors and all Americans. The time to act on prescription drug prices is now.”
The bill would establish these changes beginning January 2022. That transition would also begin the process of sun-setting the catastrophic phase’s existing discount program for drug manufacturers and replacing it with a new model in which drug companies pay about 20% of drug costs through discounts.
America’s Health Insurance Plans (AHIP) said the updates to Part D benefit design were “encouraging” and praised the bill’s inclusion of an out-of-pocket spending cap.
“We look forward to reviewing the details of the proposals and how they would impact the Medicare and Medicaid programs,” AHIP CEO Matt Eyles said. “Everyone knows one simple fact: Drug prices are out of control because Big Pharma alone sets launch prices, and they alone decide to raise those prices.”
PDPRA also includes several price transparency elements. For one, the bill would direct the Department of Health and Human Services to make data on Part D rebates negotiated by pharmacy benefit managers (PBMs) available online.
This data bank would be required to aggregate price concessions negotiated by PBMs and also to show the difference between what the PBM is paid by the insurer and what they charge the pharmacy.
Similarly, the bill aims to bring transparency to such negotiations in Medicaid and would amend existing laws to eliminate spread pricing practices—an issue that has been under the microscope of late.
Based on data from the Congressional Budget Office, the senators project the legislation could save Medicare $85 billion over the next decade plus an additional $15 billion in Medicaid savings.
Beneficiaries could save $27 billion in out-of-pocket costs over the next 10 years and an additional $5 billion in premium costs. They expect savings to trickle down into the commercial insurance market as well.
“This legislation shows that no industry is above accountability,” Grassley and Wyden said. “Passing these reforms, especially those that will affect some of the most entrenched interests in Washington, is never easy—but Americans are demanding reform, and action is long overdue.”