The House recently passed H.R. 3 – the Elijah E. Cummings Lower Drug Costs Now Act — and the Bill has been received by the Senate for consideration.
The basic proposal is to require the U.S. Gov’t to negotiate on Medicare drug prices for insulin and >25 of the top-125 drugs (by national spending). The negotiation includes a price cap:
The negotiated maximum price may not exceed (1) 120% of the average price in Australia, Canada, France, Germany, Japan, and the United Kingdom; or (2) if such information is not available, 85% of the U.S. average manufacturer price.
If the manufacturer fails to comply then there will be civil/tax penalties. So, the word “negotiation” should be placed within quotation marks. The Congressional Budget Office predicts that price negotiation prevision would lower government spending by about $500 billion over the next decade.
This particular proposal spends most of the money – by adding dental, vision, and hearing to Medicare.
Current law includes a “noninterference” clause associated with Medicare Part D:
Noninterference.—In order to promote competition under this part and in carrying out this part, the Secretary—
(1) may not interfere with the negotiations between drug manufacturers and pharmacies and PDP sponsors; and
(2) may not require a particular formulary or institute a price structure for the reimbursement of covered part D drugs.
42 U.S.C. 1395w-111(i).
Although not a “patent” bill, the proposal would significantly impact the market for patented drugs and biologics. What is unclear at this point is how research would shift. PhRMA estimates that the US Bio / Pharma industry spent about $100 billion on research in 2017.
This Bill is likely to be blocked by Republican leaders in the Senate, although many Republicans have offered some support for “interference” in principle.