House Committees Hold Hearings on Bill to Allow Medicare to Negotiate Lower Drug Prices

This week, two House committees held hearings on bills to give Medicare the power to negotiate with drug companies for lower drug prices. Both the House Energy and Commerce Committee and the Education and Labor Committee heard from witnesses on why the proposed bill (HR 3) would reduce costs and benefit consumers.

HR 3 was recently introduced by Speaker Nancy Pelosi (D-CA-12) after months of drafting and deliberation. Titled the Lower Drug Costs Now Act, it gives the Secretary of Health and Human Services broad power to negotiate the prices of up to 250 drugs per year, based on a list of the most expensive drugs that have no competition from generic drugs or biosimilars. To ensure negotiations lead to real price reductions, the bill creates a maximum price for any negotiated drug with an international price index, to be called the Average International Market (AIM) price. It would be 120% of the drug prices in other developed countries.

HR 3 also holds drug companies accountable. If they refuse to negotiate or do not reach an agreement with Health and Human Services, they will be fined, starting at 65% of the gross sales of the drug in question and increasing by 10% every quarter the company is out of compliance, up to a maximum of 95%. This provides a very powerful incentive for drug manufacturers to reach an agreement and lower prices.

Furthermore, all drugs in Medicare will face a new inflation rebate. If a drug company has raised the price of a drug in Medicare Part B or D above the rate of inflation since 2016, they have to either lower the price or pay the entire price above inflation in a rebate back to the federal government. There will also be a $2,000 out-of-pocket limit for prescription drugs for Medicare beneficiaries.

Finally HR 3 will take the savings obtained from negotiating lower drug prices and reinvest them in drug research and development at the National Institutes of Health (NIH). Between 2010 and 2016 every drug approved by the Food and Drug Administration was developed based on NIH research. Much of the real innovation that produces new medicines takes place there.

During the Education and Labor Committee hearing, Frederick Isasi (Director of Families USA) and David Mitchell (founder of Patients for Affordable Drugs NOW) testified eloquently in support of the bill. Isasi praised the bill but said it could be strengthened; he recommended increasing the number of drugs subject to negotiation. "One third of Americans who are trying to obtain drugs aren't taking them because of costs," he said. " We hear stories all the time about patients who get ill or even die because they can’t afford their drugs."

Mitchell countered claims that HR 3 would harm innovation. "I have an incurable blood cancer," he stated, "and prescription drugs are keeping me alive. Innovation, for me, is literally a matter of life and death." But drugs don't work if people can't afford them. " Despite what drug companies tell us, sky high prices are not about innovation. There is no correlation between research and the price assigned to a drug."

Democratic Representative Susan Wild of Pennsylvania spoke angrily about how her constituents were suffering because of rising drug prices. She declared that "This is an ethical issue. We have people dying because they can't afford drugs!...The market has completely failed them. This bill is coming forward because until now, we have failed the American people."

Now that hearings in two committees have been held, we hope that HR 3 will soon come to the House floor. Senate Majority Leader Mitch McConnell has denounced the bill as socialism, but it includes many good provisions, some of which have even been endorsed by the Trump administration. The House and Senate should pass HR 3 as soon as possible, and ensure that Americans have access to affordable prescription drugs.