Senate Democrats have narrowly reached a deal on legislation to give Medicare the power to negotiate for lower drug prices.
The Senate released text Wednesday (PDF) on the deal that also repeals the controversial Part D rebate rule and installs a cap on monthly cost-sharing payments for Part D and Medicare Advantage plans.
The legislative text shows that starting in 2026, the Department of Health and Human Services will choose 10 drugs eligible for negotiation. The next year, the number of eligible drugs will increase to 15, and in 2029 and every year after by 20.
The sole-source drugs subject to negotiation will be chosen based in part on their total spending under Medicare Parts B and D. There is an exception for small biotech drugs from 2026 through 2028 such as vaccines and excludes certain orphan drugs as well.
In addition to the drug negotiation policy, the legislation includes:
- A repeal of the controversial Part D rebate rule originally released by the Trump administration. The rule would have gotten rid of the safe harbor for Part D drug rebates and replace it with a new one for point-of-sale discounts.
- A cap on Medicare Part B and D rebates by manufacturers for single-source drugs and biologics with prices increasing faster than inflation.
- Monthly caps on cost-sharing payments under prescription drug plans in Medicare Advantage and Part D plans starting Jan. 1, 2025.
Drug pricing reforms were included in the $1.75 trillion Build Back Better Act that passed the House late last year. However, that legislation stalled in the Senate after opposition from Sen. Joe Manchin, D-West Virginia.
The proposal is getting major pushback from the pharmaceutical industry. The Pharmaceutical Research and Manufacturers of America, a key industry group, said "Democrats weakened protections for patient costs included in previous versions while doubling down on sweeping government price-setting policies that will threaten patient access and future innovations."
Senate Democrats will likely use a parliamentary procedure called reconciliation to pass the legislation through the Senate where Democrats have a 50-50 majority, with Vice President Kamala Harris holding a tie-breaking vote.
Reconciliation ensures that any budgetary bill can be considered in the Senate via a simple majority and avoid the 60 votes needed to bypass a legislative filibuster.
The drug pricing deal comes as healthcare groups and other stakeholders have been fervently pressing Congress to extend enhanced subsidies for Affordable Care Act plans that will expire after this year.