Industry Raises Red Flags Over Drug-Pricing Bill in the US

By Patricia Van Arnum - DCAT Editorial Director

April 28, 2021

The Biotechnology Innovation Organization and the Pharmaceutical Research and Manufacturers of America have raised concerns over recently re-introduced legislation in Congress over drug pricing. The bill includes measures for international drug reference pricing, something strongly opposed by industry.

House re-introduces drug-pricing bill

Last week (April 21, 2021), the US House of Representatives re-introduced a drug-pricing bill that it had previously passed in the prior Congress in December 2019 but that did not proceed further in the Senate. With the previous Congressional session ending at the end of 2020, and a new Congress taking office in January 2021, a new bill, The Lower Drug Costs Now Act (H.R. 3), was introduced. Key measures of the bill are outlined below.

HHS authorized to negotiate drug pricing for certain drugs. Under the proposed legislation, the Secretary of the Department of Health and Human Services (HHS) would be authorized to negotiate pricing for up to 250 drugs per year, drawn from a refilling list of the most costly drugs (price times volume) in the US for those drugs without competition from at least one generic or biosimilar on the market. The price determined by the negotiation process would be available to the commercial market not just Medicare beneficiaries. Medicare is the US federal government healthcare program for individuals 65 years or older.

International drug price index and referencing US drug prices. One of the measures most strongly opposed by the bio/pharmaceutical industry is a system to set drug prices in the US based on an international drug price index. The proposed legislation creates a maximum price for any negotiated drug with an international price index, to be called the average international market (AIM) price. The drug price could not be more than 120% of the AIM price based on the average volume-weighted sales price of the drug in six foreign markets: Australia, Canada, U.K., France, Germany, and Japan. The AIM price would also be set as the government’s target price for the drug, and the government would be required to accept any price below the AIM price.

Penalties for companies that do not participate Under the bill, if a drug manufacturer refuses to participate in any part of the negotiation process or does not reach agreement with the HHS, it will be assessed a non-compliance fee starting at 65% of the gross sales of the drug in question and increasing by 10 percentage points every quarter the manufacturer is out of compliance, up to a maximum of 95%. If a manufacturer agrees to a price and then overcharges Medicare or fails to offer the negotiated price to other payers, the manufacturer will be subject to a civil monetary penalty equal to 10 times the difference.

Inflation rebates. Under the bill, if a drug company has raised the price of a drug in Medicare Part B (physician-administered drugs) or Part D (the prescription drug benefit program) above the rate of inflation since 2016, they can either lower the price or be required to pay the entire price above inflation in a rebate back to the US Treasury.

A new, $2,000 out-of-pocket limit for drug costs. The proposed legislation would create a $2,000 out-of-pocket limit for prescription drugs under Medicare.

Industry feedback

Both the Pharmaceutical Research and Manufacturers of America (PhRMA), which represents innovator, research-based bio/pharmaceutical companies, and the Biotechnology Innovation Organization (BIO), which represents both large and small bio/pharmaceutical companies, are critical of the proposed legislation.

“The American people want to end the pandemic, get the economy back on track and make healthcare more affordable and predictable,” said PhRMA CEO Stephen J. Ubl in an April 22, 2021 statement. “Instead, House leaders have introduced the same old divisive drug pricing proposal that will put more barriers between patients and their medicines. It will also destroy an estimated one million American jobs, cede our leadership in life sciences, and stifle the development of new treatments while failing to address the broader challenges facing patients…The American people deserve a better approach, and that’s why we put forward a set of ideas that will lower what patients pay at the pharmacy and protect access to medicines and future innovation. The status quo isn’t working, and we’re willing to do our part to deliver the kind of responsible solutions all patients need.”

BIO is also critical of the proposed legislation, particularly international referencing price measures. “…[T]his proposal, as a de-facto price control measure, would handicap future medical innovation—including for future pandemics—and destroy hope for millions of patients living with diseases for which no cures or viable treatments currently exist,” said Rich Masters, BIO’s Chief Public Affairs and Advocacy Officer, in an April 23, 2021 statement.

What’s next

The proposed House bill will be considered along with other proposed legislation, along with proposals, yet to made by the Biden Administration. Last month (March 2021), Congress introduced three bills that build on the House bill. The legislative package includes three bills: (1) The Prescription Drug Price Relief Act that would tie the price of prescription drugs in the US to the median price in Canada, the UK, France, Germany, and Japan; (2) The Medicare Drug Price Negotiation Act would authorize the HHS Secretary negotiate lower drug prices under Medicare Part D, the federal prescription drug program for people 65 or older; and (3) The Affordable and Safe Prescription Drug Importation Act that would allow patients, pharmacists, and wholesalers to import drugs from Canada and other countries. The bills were introduced in the Senate by Senator Bernie Sanders (I-VT), and in the House of Representatives by Reps. Ro Khanna, (D-CA), Lloyd Doggett (D-TX), Peter Welch (D-VT), and Cori Bush (D-MO), along with more than two dozen co-sponsors.

The introduction of these bills put into motion again the policy debate on drug pricing in the US. The legislative process in the US involves subcommittee and committee hearings with stakeholders as Congress considers these measures. The debate will also further involve the current Administration and its policy preferences as Congress debates the measures. Also, the manner in which any proposed legislation would proceed procedurally would also be a factor in the process.