Bryan Garnier & Co Morphosys (20th September 2019)
Drug prices in the US: a new bill proposed by House Speaker Nancy Pelosi
The new bill is using the basket price’s idea again
Yesterday, the House speaker (Democrat) Nancy Pelosi unveiled her drug pricing bill. Since leaks occurred in the past few days, the content of this bill was no longer a surprise for anybody. The key elements are the following:
- The HHS Secretary would be able to negotiate the prices of as many as 250
drugs which are the costliest to the healthcare system (taking into account
prices but also volumes). The maximum price to be negotiated would be no
more than 1.2 times the average price of six countries (Australia, France,
Germany, Canada, Japan and UK). If a manufacturer refuses to enter into
negotiations, it will get a penalty starting at 65% of previous year sales of
the drug, increasing by 10% every quarter the manufacturer is out of
compliance. Drugs with generics or biosimilars will not be included into the
- This negotiated price should be proposed to payers for commercial plans
(other than Medicare and Medicaid plans), but the payers may decide not to apply it;
- When the price is negotiated, it then cannot increase more than the inflation calculated starting in 2016;
- The out-of-pocket for Medicare (part D) should not be over USD2,000 per
patient per year. The catastrophic coverage (donut hole) would be modified
and pharma companies will be responsible for 30% of the drug costs above
the cap (today pharma companies do not contribute above the catastrophic
threshold set at USD5,100 per year).
Republicans are not supporting the bill
This bill follows the bipartisan Prescription Drug Pricing Reduction Act (PDRA) passed by the Finance Committee last July (and proposed by Sen Grassley and Sen Wydden) and has some overlaps with the latter (that is why Donald Trump has tweeted "it's great to see Speaker Pelosi's bill today").
However Republicans have immediately stated that they will reject the price-setting provisions (item 1 of this note).
Just the start of a volatile year to come
This new proposal shows clearly that the year to come will be rich in propositions regarding drug prices made by the presidential candidates in the US, but we continue to think, like many other observers, that it will be extremely difficult to significantly change the existing healthcare system and the way drug prices are fixed and negotiated without reforming it entirely. We note that while the DJ was down yesterday, Pharma stocks were up despite Pelosi's bill release.