Under the Democraticleadership plan, companies that refuse to comply with negotiationswould find themselves slapped with an excise tax equivalent to 50percent of sales on the drug in the previous year. (Photo:Shutterstock)

As House Democrats hash out a proposal empowering the federalgovernment's top health official to negotiate lower drug prices, House SpeakerNancy Pelosi is taking it a step further and pushing a plan thatcould benefit even those Americans with private healthinsurance.

A draft plan spearheaded, but not yet released, by Pelosi andother House Democratic leaders would ensure that prices negotiatedon the most expensive drugs would apply not only to the governmentbut to all payers, including employers and insurers, a Democraticaide said.

Related: Reference-based pricing: a panacea for high drugprices?

But first, Democrats must agree on how best to muscle drugcompanies to the negotiating table, as well as how to preventAmericans from paying more or even losing access to the other drugsthey take. Pelosi has faced pressure from progressive HouseDemocrats, who have pushed for a more aggressive approach,including opening up all drugs to negotiations.

However bold a plan Democrats produce, any proposal to invitethe federal government into price negotiations looks doomed in theRepublican-controlled Senate, where GOP leaders have said they willnot let it advance.

That means the fight over whether the government should cutdeals with drugmakers is likely to play out on the members' 2020election campaign trails, rather than in the halls of Congress.Democrats could again try to tar Republicans as indifferent to thestruggles of Americans who cannot afford health care, whilepromoting their own attempts to fulfill 2018 campaign promises toaddress skyrocketing drug prices.

Drug prices have been on the rise for decades and, according to the Kaiser Family Foundation, spending on prescription drugs — adjusted for inflation —increased to $1,025 per capita in 2017, from $90 in 1960. (KaiserHealth News is an editorially independent program of thefoundation.)

Experts say the lack of competition is much to blame for highdrug costs. The federal patent system, in which companies aregranted exclusive control of their drug for years and can exploitloopholes to block competitors, frees those firms to charge as muchas they like. That can leave patients with no choice but to payexorbitant prices for the drugs they need.

Under the current system, negotiations are conducted on aplan-by-plan basis between drugmakers and pharmacy benefit managers, the intermediaries who themselveshave faced questions about how much they contribute to high drugcosts.

Many Democrats argue that the secretary of Health and HumanServices should negotiate prices, leveraging the power of thefederal Centers for Medicare & Medicaid Services, the largesthealth care payer in the country.

Though it may change before being released, the currentDemocratic leadership plan would authorize the HHS secretary tonegotiate the prices of the 250 most expensive drugs.

“We want them to address as many as possible, as quickly aspossible,” Pelosi said at a recentevent after progressives pushed her to include more than the 25drugs she initially proposed targeting.

The negotiation would begin with a price range set by HHS, theDemocratic aide said, with the aim of agreeing on the maximum pricethat could be charged for a drug.

The Government Accountability Office would help sort outdisagreements between HHS and drugmakers, although the specifics ofthat arrangement are still uncertain, the aide added.

Details of how the negotiated drug prices would be transferredto the private sector remain to be seen.

Limiting negotiations to the 250 most expensive drugs wouldtackle a piece of the drug market that accounts for about78 percent of prescription drug spending, according toan analysis conducted by Patients for Affordable Drugs, anadvocacy group.

Democratic leaders believe the 250-drug threshold would balancetwo competing interests, the aide said: maximizing the impact onprescription drug spending, while theoretically keeping the list ofnegotiable drugs to a number HHS could handle.

Otherwise, faced with more drugs —or all of them — to negotiate,the HHS secretary could reasonably determine that was more than theagency could manage and potentially cherry-pick which drugs topursue, the argument goes.

An HHS spokesperson declined to answer questions about how sucha proposal would look in practice.

The Congressional Budget Office cautioned in May thatnegotiations would likely be effective at lowering prices only ifthe HHS secretary were granted “some source of pressure” to useagainst drugmakers.

Under the Democratic leadership plan, companies that refuse tocomply with negotiations would find themselves slapped with anexcise tax equivalent to 50 percent of sales on the drugin the previous year, the aide said.

But some Democrats worry that would not be enough to pressuredrug companies to negotiate. A competing proposal, from Rep. Lloyd Doggett (D-Texas) andSen. Sherrod Brown (D-Ohio) and endorsed by the Congressional Progressive Caucus, wouldthreaten companies with having their drugs' patents expire soonerthan planned if they did not comply with the secretary'snegotiations on behalf of Medicare beneficiaries.

A second Democratic aide said that proposal, still considered adraft, would cut to the heart of the problem by undermining thedrugmakers' exclusivity, while protecting patients' access toprescriptions should pharmaceutical companies walk away from pricetalks.

“I'm for whichever plan provides the most relief for the mostpatients and does not allow Big Pharma to dodge responsibility forwidespread price-gouging,” Doggett said in a statement.

Either plan would be better than the current system, said GerardAnderson, a health policy professor at Johns Hopkins University inBaltimore who has been advising House Democrats on theirproposals.

However, he said, both proposals would require some kind ofnational formulary — a list of prescription drugs covered byinsurance, as determined by the negotiations — to be effective.

“When you're negotiating with a company where there's threeother competitors, you need to say 'I'm going to give you anexclusive contract' in order to get a good deal,” Anderson said inan interview.

The Veterans Health Administration, which offers retired servicemembers discounts through its negotiations with drugmakers, isoften cited by negotiation advocates as a model that could beimitated. It regularly secures drug prices that are about 35% lowerthan those paid by Medicare beneficiaries, Anderson said.

Unlike Medicare, the Veterans Health Administration has anational formulary.

Although President Donald Trump said during his 2016 campaignthat he supports allowing the government to negotiate better drugprices, congressional Republicans broadly oppose the idea.

The HHS secretary is barred from directly negotiating priceswith drugmakers for Medicare Part D, the program's prescriptiondrug plan, which covered more than 43 million Americans last year. Instead, the privateplans that offer Part D benefits negotiate on their own.

Sen. Chuck Grassley (R-Iowa), chairman of the Finance Committee,said on the Senate floor last month that part of the appeal ofMedicare Part D is that seniors can select a plan based on itsformulary, allowing them access to the drugs they need.

That choice could disappear if Democrats enable negotiations, hesaid.

“As the senator who once again chairs the committee withjurisdiction over Medicare policy, I'm not going to let Congressunravel what's right about Medicare Part D,” Grassley said.

But the Democratic aide with knowledge of the leadership'sproposal dismissed that concern, saying Medicare beneficiarieswould keep the option to select the plan that best suits them.

Anderson also said that concern does not hold up, explainingthat there is “a huge amount of overlap” between the drugs on theVeterans Health Administration's formulary and those on mostMedicare drug plan formularies.

It is unclear when House Democratic leaders might unveil theirfinished plan, though Pelosi is reportedly determined to do sobefore the 2020 election heats up.

Kaiser HealthNews (KHN) is a national health policy news service. It is aneditorially independent program of the Henry J. Kaiser Family Foundation whichis not affiliated with Kaiser Permanente.

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