Biden Puts Drug Pricing at Front of Medicare Spending Debate (2)

President Joe Biden is doubling down on efforts to curb what Medicare and Medicaid pay for medicines, a proposal that would allow reductions in Medicare spending without changing benefits or physician pay.

Biden’s fiscal 2024 budget request, released Thursday, called for extending the Inflation Reduction Act (Public Law 117-169) inflation rebates to the commercial market and expanding the number and scope of drugs that will soon face government negotiations. Currently, the law allows only Medicare to collect rebates from drug manufacturers that raise prices on products faster than the rate of inflation, and focuses negotiation only on older medicines.

The budget also requests higher spending for the Department of Health and Human Services to extend certain health programs. Presidential budgets are largely symbolic documents, pointing to policies that administrations want to focus on. The administration’s proposal for health programs has a major focus on curbing drug spending.

Earlier: Biden’s Medicare Budget Plan Faces GOP, Pharma Pushback (1)

Biden and congressional Democrats have accused Republicans of wanting to cut Medicare benefits as part of their call for reducing overall federal expenditures. GOP leaders have said they won’t touch the public health insurance for seniors, but want cuts to other health programs.

Read More: Biden Seeks Bigger Boost for Domestic Agencies Than for Military

Medicare Solvency

Biden is proposing to double the number of drugs Medicare would be required to negotiate starting in 2026, according to data from the Centers for Medicare & Medicaid Services shared with Bloomberg Law. That would mean the government would seek to curb the prices of 20 drugs that first year, instead of 10, and 40 each subsequent year, according to the CMS data.

Crucially, Biden is also proposing to shorten the timeline any drug is exempt from negotiation to five years—a major change for some pricey medicines.

Doing so would save $160 billion over the next decade, the White House says. Coupled with a proposed tax increase on income over $400,000 per year, the White House is boasting it could put $200 billion into Medicare’s trust fund by 2033 to help extend the solvency of the program.

Medicare spending is on track to rise to about 18% of all federal spending in 2023, from about 10% in 2021, reaching nearly 4% of the US’s gross domestic product, according to Medicare data. Total outlays for Medicare reached $689 billion in 2021, with Part B—physician services, hospital outpatient services, and physician-administered drugs—recording the largest share of that spending, accounting for nearly half of it.

The new federal law will subject most drugs to government price negotiations until nine years after their approval date. More complex pharmaceuticals known as biologics are exempt until 13 years after approval. Reducing those timelines could make the prices of more drugs subject to negotiation.

Read More: Curbing Rising Drug Prices: Medicare Inflation Rebates Explained

Energy and Commerce Committee Chair Cathy McMorris Rodgers (R-Wash.) criticized the proposal, which Biden floated earlier this week.

“Rather than seek bipartisan solutions that strengthen Medicare and preserve benefits that seniors enjoy today, President Biden wants to double down on government price setting policies from the IRA that have already stopped new and potentially life-saving treatments from reaching patients,” she said in a statement.

Biden also proposes allowing the federal government to negotiate with drugmakers on behalf of state Medicaid programs to get deeper discounts by effectively pooling state purchasing power, according to the budget documents released by the White House.

HHS Increase

Overall, the Biden administration wants to increase the discretionary budget of the Department of Health and Human Services for fiscal 2024 to $144 billion, an 11.5% increase from its enacted level for 2023.

Part of that increase would come from making permanent bolstered premium tax credits for those getting insurance through the Affordable Care Act and offering “Medicaid-like” coverage to people in states that haven’t expanded their Medicaid programs to the level permitted by the ACA. There’s also a call for a $150 billion, 10-year investment in home and community-based care services in the budget.

Biden also is calling for putting the federal community health center program “on a path to double its size and expand its reach.” Sen. Bernie Sanders (I-Vt.), the chair of the key Senate Health, Education, Labor, and Pensions committee, has likewise called for greatly expanding the health centers program.