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House Democrats Expect Drug Price Cap to Cover Employer Plans

Aug. 3, 2021, 9:35 AM

House Democrats agree with employer, labor, and consumer groups that commercial health plans should be included in legislation designed to curb drug prices, according to sources.

Whether plans sponsored by employers or insurers can be covered under H.R. 3‘s proposed cap on drug price inflation depends on whether the addition is allowed under a budget procedure that Congress will use to advance expanded Medicare benefits in the fall.

“We’re trying to see if we can make that work this year,” said a House Democratic aide who spoke on condition of anonymity. “We haven’t resolved it completely, but we’re trying.”

The House drug pricing bill is designed to offset the cost of the expanded benefits by lowering what Medicare pays for prescription drugs. The bill’s chief driver of the lower prices is a provision that allows the federal government to negotiate directly with drugmakers on how much it pays for high-priced products. Commercial plans—those run by employers, insurers, or labor unions—would pay the same amount for those drugs.

The bill also would require pharmaceutical companies to rebate to the Treasury Department the amount that they raise prices for certain drugs above inflation.

Employers and labor unions want those rebates in commercial plans as well. Without that protection, they argue, they are susceptible to large price increases in prescriptions. They’ve been discussing the issue with House leaders for months, according to a source involved in the talks.

“We want to make sure that any changes that happen will affect people in the commercial market as well as people in the Medicare program,” Amy Herr, director of health policy for the West Health Policy Center, said in a July 28 webinar.

She estimates that negotiating drug prices in the commercial market could save employers about $200 billion and employees another $60 billion between 2023 and 2029.

West Health Policy Center does research and education on slowing rising health-care costs while investigating ways to improve access to and the quality of care, particularly for seniors.

Budgetary Effect

Republicans don’t support the legislation, so the only path to passage is a budget process called reconciliation that bypasses the need for 60 votes in the Senate. Only policies that change spending or revenues can be included in budget reconciliation bills, so lawmakers would need to write the commercial insurance provision such that it affects the budget.

If the Senate parliamentarian doesn’t rule that the provision is primarily budgetary, “that provision which applies the inflation rebate to the commercial sector would have to be dropped,” the House aide said.

“We haven’t made a final determination of the language,” the House aide said. “I think we’re going to put it in there.”

Drug pricing legislation passed by the House in 2019 would have allowed commercial health plans to benefit from prices negotiated by Medicare for new drugs coming onto the market. But the bill didn’t include a provision allowing commercial plans to benefit from the inflation rebate.

Worried Prices Will Increase

“If they don’t include us, we’re worried that basically we’ll continue to see price increases well above the rate of inflation, and potentially even higher increases because drug companies are trying to profit maximize, and they’re making up for their inability to raise prices on Medicare by raising prices on us even higher,” Shawn Gremminger, director of health policy for the Purchaser Business Group on Health, said in an interview.

The PBGH, one of the employer groups working to get the price cap provision included in the drug price legislation, represents about 40 companies that spend about $100 billion a year covering 15 million people, Gremminger said.

Consumer advocates concur. “If we really want to address prescription drug pricing abuses, it’s critical that these employer-sponsored plans have access to the savings, to a fair price,” Frederick Isasi, executive director of Families USA, said in an interview.

“We want this problem solved for everyone, not just Medicare,” Isasi said. About 150 million Americans receive health-care coverage through employer-sponsored plans, he said.

Tax Write-Offs

Employers receive large write-offs for the coverage they provide their employees, Isasi said. “When you think about something as important as the price you’re paying for prescription drugs, it has a very direct impact on the taxes that can be collected,” he said.

“There’s a pretty clear argument that this definitely has a budgetary impact,” and it should be included in a budget reconciliation bill, he added.

Senate Democrats are on board for including commercial plans in provisions that would lower drug prices for Medicare, assuming the language passes parliamentary muster.

Senate Finance Committee Chairman Ron Wyden (D-Ore.) released a set of principles in June for lowering drug prices. One of the principles says, “Drug pricing reforms that keep prices and patient costs in check should extend beyond Medicare to all Americans, including those covered by employer and commercial health plans.”

The Pharmaceutical Research and Manufacturers of America (PhRMA) didn’t respond to a request for comment.

To contact the reporter on this story: Sara Hansard in Washington at shansard@bloomberglaw.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloombergindustry.com; Karl Hardy at khardy@bloomberglaw.com

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