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Trump International Drug Price Plan Would Hurt Bill in Congress

Jan. 9, 2020, 3:02 PM

A pending Trump administration proposal that would tie Medicare reimbursements to foreign countries’ drug prices could hurt a separate bipartisan effort in the Senate to lower drug prices because of an obscure budget rule.

The administration’s proposed rule, which has yet to be published, is expected to match payments for drugs administered in a doctor’s office more closely with what other countries pay.

Senators are weighing a separate measure on drug pricing by Iowa Republican Chuck Grassley and Oregon Democrat Ron Wyden that would cap the amount Medicare beneficiaries must pay out of pocket for their drugs.

The administration proposal, if published, could lower the prospects of passing the Senate bill due to a Congressional Budget Office rule that could cut an estimate of how much the bill would save taxpayers.

The CBO is required to estimate legislation costs, in an effort to ensure lawmakers are aware of how a particular measure would impact federal coffers. Such projections determine how much money Congress can allot toward other issues, such as funding federal health programs.

A reduced savings projection hurts the chances that lawmakers will support the legislation.

Projected Savings

When the administration releases a proposed rule, the CBO must take into account any projected financial savings from the rule when providing a cost estimate, or score, for legislation on the same topic. The CBO generally cuts projected savings from legislation that overlaps with an administration proposal.

The CBO determines a cost estimate by calculating a baseline for all government health-care expenditures, including the savings from any proposed rule. The amount reduced depends on whether the CBO expects a rule to be finalized. If certainty is high, the full savings from the proposed rule will be included in the budget baseline. But the CBO might only include 50% of the savings if there’s a 50-50 chance of the rule taking effect or if the rule could have half the maximum possible effect.

Administration officials believe the CBO rule would apply to the Senate bill because both proposals would affect spending in the Medicare Part B program, which pays for drugs administered in a doctor’s office, two former officials said on condition of anonymity.

The HHS Office of the Assistant Secretary for Planning and Evaluation projected the advanced version of the proposed rule would cut Part B spending by $17 billion to $54 billion. In addition to tying the cost of some Part B drugs to foreign drug prices, the proposed rule is expected to change the payment from an average sales price plus 6% to a flat fee. The legislation would place a $1,000 cap on that payment and impose a five-year markup to the average sales price plus 8% for biosimilar drugs.

Proposal Under Review

Grassley’s staff asked the administration not to publish its proposed rule because they say it would kill the legislative effort, according to a former Republican congressional staffer who asked not to be named.

The administration so far has complied with that request but is prepared to move forward with the proposed rule on drug pricing if bipartisan efforts in Congress lag or collapse, a source familiar with the administration’s thinking said.

The administration’s rule has been under review at the Office of Management and Budget since June 2019. The advanced version of the proposed rule said it would be phased in over five years and is estimated to provide about 30% savings in total spending for the selected drugs.

An earlier version of the Grassley-Wyden bill was projected to save taxpayers $85 billion and save beneficiaries $27 billion over a decade, the CBO said. The administration’s proposed rule, if published, would require that Grassley get a new cost estimate from the CBO before moving forward with the legislation, further delaying the process.

The legislation would also require that Medicare plans covering drugs received in a pharmacy and drug middlemen include price concessions and fees the middlemen negotiate with pharmacies at the point of sale.

Pushing for Support

The Senate Finance Committee in July approved an earlier version of the legislation. Nine Republicans opposed the measure.

Grassley told reporters Jan. 8 that the bill would definitely pass if it was brought to a vote on the Senate floor, but that McConnell wants him to get more co-sponsors and that there’s more work to be done.

Trump said on Twitter in September that he likes the Senate legislation “very much.”

The political coalition around the Senate legislation is fragile as a result of opposition from McConnell and drug companies, and releasing the administration’s proposed rule could fracture the current coalition of supporters. Grassley’s camp is hoping that they can get enough support to get McConnell to bring the legislation to a Senate floor vote.

If a deal can’t get cobbled together in Congress before May, it’s likely the administration will officially propose its drug pricing rule, the source familiar with the administration’s thinking said. Congress has to provide funding for some federal health programs, such as community health centers, by May, and the projected financial savings from the drug pricing legislation could offset the cost of those federal health programs.

—With assistance from Alex Ruoff

To contact the reporter on this story: Shira Stein in Washington at sstein@bloomberglaw.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com; Alexis Kramer at akramer@bloomberglaw.com

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