Democrats in the U.S. Senate continue to negotiate an economic package that advances President Joe Biden’s key priorities. Prescription drug pricing legislation that would drastically alter the Medicare program and healthcare subsidies may be the only two pieces of the package that will advance to the full Senate.

The proposed prescription drug pricing reform legislation includes language similar to provisions in H.R. 3, which was introduced in 2021. CBSA was active in voicing concerns about H.R. 3. The current Senate bill includes price setting, inflation penalties, and a Medicare Part D redesign, which will impact CBSA members and the patients they serve.

Three Key Elements of the Prescription Drug Pricing Legislation:

Price Setting – lowering prices through drug price negotiation:

• Government price setting for single-source, high-spend medicines in Medicate Parts B and D starting at nine years for small molecules,13 years for biologics
• Ceiling price based on age of medicines, no floor caps/prices

Inflation Penalties – prescription drug inflation rebates:

• Inflation rebates paid on units dispensed in Medicare Part B and Part D, plus the commercial market

Part D Redesign – improvements and maximum out of pocket cap for Medicare beneficiaries:

• $2,000 out of pocket cap in 2025
• Smoothing of patient cost sharing

CBSA Engagement

CBSA remains committed to advancing affordability solutions that correct market failures, increase competition, and lower costs for patients. Over the years, CBSA has opposed similar provisions that we’ve seen included in other legislative proposals, including allowing government negotiation in Medicare and imposing inflation rebates in Medicare Part B and D. Such proposals would destabilize the market-based system that determines the value of medicines and deter investment in life sciences innovation.

The legislation as written does not adequately address the misaligned incentives in the healthcare system. CBSA encourages lawmakers to look at the system as a whole, reviewing the influential role insurers, pharmacy benefit managers (PBMs) and others play in deciding how much patients pay for medicines at the pharmacy counter.

We will continue to coordinate with members and industry partners to voice our concerns about these types of proposals and educate lawmakers about how these policies will limit patient access and stifle medical innovation.

Additional Detail on Key Changes to Prescription Drug Pricing Reforms 

Below is an overview of the changes in the legislation from the house version that was passed earlier this year. The bill was largely unchanged, but these are some of the key changes.

Price Setting – lowering prices through drug price negotiation:

• Firms up the number of drugs the Secretary must negotiate. The Secretary will be directed to negotiate a specific number of drugs every year, rather than “up to” the required number of drugs. This removes Secretarial discretion and ensures budgetary aims of the provision are met.
• Updates implementation timelines
  • Start of first year of negotiation has been moved forward to 2023, instead of 2024.
  • Negotiated prices will go into effect in 2026, instead of 2025.
  • Small biotech protections will go into effect and end a year later to match the shift in negotiation implementation dates.
• Allows for delay of negotiation for biosimilar market entry. Allows the Secretary to delay negotiation of a biologic drug for up to two years, if a biosimilar demonstrates a high likelihood of entering the market before the negotiated price would take effect. A rebate will be owed by the biologic manufacturer if the biosimilar does not enter the market within delay period.
• Clarifications including:
  • Adds language to clarify that manufacturers are not required to provide price concessions that exceed the lower of a drug’s 340B price or the Medicare negotiated price.
  • Specifies the calculation of the non-Federal average manufacturer price
• Removes special provisions for insulins. Insulins are not treated as a separate class for the purposes of negotiation.
• Technical edits to reflect intent, including corrections to conforming amendments and excise tax

Inflation Penalties – prescription drug inflation rebates

• Implementation of inflation rebates. Part D inflation rebates will begin October 2022 (rather than July 2022). Start of Part B inflation rebates remains January 2023.
• Part B coinsurance protection. Application of inflation growth cap to beneficiary coinsurance in Part B will begin in April 2023 (rather than January 2023).

Part D Redesign – improvements and maximum out of pocket cap for Medicare beneficiaries

• Updates implantation timelines
  • Redesign of Part D benefit will take place in 2025 rather than 2024.
  • Small manufacturer phase in and Part D premium stabilization will take place starting and ending a year later, to conform with new implementation dates.
• Beneficiary maximum out-of-pocket cap begins in 2024. Starting in 2024, beneficiaries will owe $0 out-of-pocket in the catastrophic phase; by 2025 beneficiary total out-of-pocket spending for Part D drugs will be capped at $2,000 per year.
• Expands Part D LIS. The income threshold for eligibility for the Part D low-income subsidy has been expanded from 135% to 150% of the federal poverty level.
• Stabilizes premiums. Premium growth will be capped at 6% per year through 2029, instead of 4% through 2027.
• Beneficiary premium percentage adjustment. To provide beneficiary premium protection in the long run, the Secretary will be authorized to make a one-time adjustment to the beneficiary Part D premium percentage in 2030.
• Part D vaccine out-of-pocket protection. $0 cost-sharing for vaccines will go into effect in January 2023.
• Updates repeal of the rebate rule. The repeal of the rebate rule will begin January 2027 to accommodate the delay include in recent gun safety legislation
• Insulin copay cap. The $35 copay cap for insulin has been removed.