Democrats are touting a historic deal that would for the first time cap seniors’ out-of-pocket drug costs and empower Medicare to negotiate some prices with drugmakers, arguing it sets a precedent after decades of failures to curb spending that has frustrated consumers.
“While leading congressional Democrats are claiming they have broken pharma’s ‘iron grip’ on Congress, our analysis leads us to believe pharma’s CEOs are likely popping champagne and smoking cigars,” financial services firm Raymond James wrote in an investor’s note to clients on Tuesday night.
Liberal lawmakers initially hoped to give Medicare authority to negotiate the prices of up to 250 expensive drugs each year. Under a deal struck Tuesday with moderates like Sen. Kyrsten Sinema (D-Ariz.), the number of drugs subject to negotiation would eventually be no more than 20. Democrats also significantly watered down a provision to rein in costs by taxing manufacturers that hike their drug prices faster than inflation.
“While [the deal] might not translate into savings overnight, it will at some point down the road,” said Juliette Cubanski, a deputy director at the Kaiser Family Foundation, who offered a glass-half-full assessment of it. “It certainly seems better than not doing anything at all from the perspective of helping patients with their now potentially unaffordable prescription drug costs.”
How big the overall savings might be is unclear since the agreement is so new that the Congressional Budget Office, which analyzes the impact of legislation, has not yet forecast how many older Americans on Medicare are likely to pay lower prices for medicine because they rely on one or more of the drugs that will be subject to negotiation.
The compromise — hammered out by congressional negotiators, who resurrected their stalled drug-price plan after the White House abandoned the effort last week — triggered Washington groups to read from a familiar script.
FreedomWorks, a right-leaning advocacy group, condemned Democrats’ announcement as a “socialist drug pricing scheme.” Pharmaceutical lobbyists launched blistering new ads, vowing to fight a measure that was still being written until Wednesday afternoon.
“If passed, it will upend the same innovative ecosystem that brought us lifesaving vaccines and therapies to combat covid-19,” Stephen J. Ubl, the CEO of PhRMA, said in a statement, echoing attacks that lobbyists made on Democrats’ earlier, much more expansive proposal — and returning to claims that some experts have soundly rejected.
Liberals, meanwhile, framed the deal as a watershed moment, celebrating provisions like a $35 monthly cap on what patients would spend on insulin.
“This is a home run bill,” said Frederick Isasi, executive director of the liberal consumer health lobby Families USA. “For the first time, the U.S. Congress is looking the drug companies in the eye and saying, ‘We are done with the abuses.’ ”
But their feelings were also summed up by Sanders, the Senate’s most aggressive drug-pricing hawk, in a one-word reaction to the compromise on Tuesday: “Complicated.”
Industry analysts noted the deal gives the pharmaceutical industry time to adjust to the new landscape, rather than suffer immediate financial consequences, and that the lower drug prices negotiated by Medicare won’t apply to commercially insured patients. Democrats’ framework also allows drugmakers to devise new business models to offset possible cuts.
For instance, the drug-pricing deal “doesn’t impact launch prices” of new drugs, said Ramsey Baghdadi, co-founder of Prevision Policy, an information service that specializes in pharmaceutical analysis. Drugmakers “can increase launch prices if needed” should Democrats’ policies cut into their revenue, Baghdadi predicted.
Another silver lining for drugmakers: Democrats took the biggest swing they could at the industry, and still didn’t cut that deep, analysts said. Congress’ next serious attempt to rein in drug prices is now likely years away.
In interviews, Democratic lawmakers and aides said that they had hoped to achieve more in a year where the party has unified control of the House, Senate and the White House, albeit with narrow margins — and when their desired drug-pricing changes poll favorably with Democrats, Republicans and independents.
Some liberals also lamented the circuitous path of the drug-price deal, saying months of negotiations cost liberals an opportunity to tout a long-sought victory ahead of this year’s elections. Democrats lost the governor’s office in Virginia on Tuesday and saw the GOP make gains across the country. If Republicans retake one or both chambers of Congress next year, that party’s leadership — traditionally aligned with the drug industry — could work to slow the drug-price plan’s implementation.
“Am I worried this is going to get rolled back? Of course,” Isasi said. “But what we have on our side here is, this is what the American people are crying out for. What we have in the message from the elections is … people who are in power, solve problems, stop dithering.”
Shawn Gremminger, health policy director at the Purchaser Business Group on Health, which represents large employers, said that Democrats’ razor-thin margins made it almost inevitable they would have to scale back their ambitions.
“Overall, I think it is the kind of compromise that one expects when you have very narrow majorities in both chambers of Congress,” he said.
If liberal lawmakers are disappointed, most are framing the deal as an opening that will enable more substantial curbs on drugmakers in the years ahead.
“We will continue to build on it,” Sen. Amy Klobuchar (D-Minn.), who worked to salvage a deal over the weekend, said in an interview. “We have to start, and this is a big start.”
A policy that may be considered the least revolutionary may also have the most immediate impact for older adults. Advocates and experts point to the $2,000 cap on how much seniors in Medicare’s prescription drug program pay out-of-pocket as a tangible improvement, since more than 1.2 million enrollees incurred costs above that amount in 2019 — some many times if they take specialty drugs for rheumatoid arthritis or cancer.
The move is “long overdue,” said Stacie Dusetzina, a Vanderbilt University professor who specializes in drug-policy research. “Every other insured group has the benefit of an out-of-pocket maximum. Offering this additional financial protection for people needing high cost or multiple drugs is an important change.”
Bill Sweeney, senior vice president for government affairs at AARP, a large advocacy group for people age 50 and over, said his group is watching closely to see how that provision is designed. Advocates want to try to prevent the private health plans that sell the drug coverage from being able to raise monthly premiums to absorb some of the costs above the cap, so that consumers do not end up paying more than they do now.
Like others, he acknowledged that the deal offers consumers far less than the legislation the House passed without a single Democratic defection in 2019, when it had no chance of becoming law because Republicans controlled the Senate. That bill, known as H.R. 3, required the federal government to negotiate at least 25 drugs to start and ramp up to a maximum of 250 in subsequent years. The current framework requires a maximum of 10 drugs to start and ramps up to no more than 20 in later years.
But Sweeney believes the deal is significant nonetheless. “Allowing Medicare to negotiate, this is a fight we have fought with PhRMA for … years,” since before Congress created drug benefits within the Medicare program in 2003. “That’s a big deal.”
The rush to strike a deal left even some lawmakers confused about what precisely was contained in it. While Rep. Kurt Schrader (D-Ore.), a holdout on the package, told reporters on Tuesday that a tax on drugmakers was being dropped from the compromise, congressional aides assured reporters it would be included. The text was circulated to lawmakers and others late Wednesday afternoon.