Dems’ plan to limit drug price inflation faces test in Senate

5 min
November 13, 2021

By Alice Miranda Ollstein and Megan Wilson

November 13, 2021

Democrats managed to strike a compromise on drug prices to advance their sweeping social spending bill. But as the House prepares to send the package to the Senate, the way the plan would extend price controls beyond Medicare to private health coverage is stoking another battle over the package.

At issue is Democrats’ push to penalize drugmakers if they hike prices of medicine faster than inflation, a provision Republicans and the drug industry see as government overreach — and, they say, a violation of the Senate’s parliamentary rules for considering the bill because it’s a non-budgetary item.

Republicans are “likely to challenge everything and anything that looks or smells like [controlling] private markets,” said one pharmaceutical lobbyist, who asked not to be identified to speak candidly about the next steps. “That is their operating plan.”

The outcome, which is expected in the coming weeks as the upper chamber combs through the $1.75 trillion package, could determine to what extent Democrats can make good on their pledge to rein in drug costs for all Americans — a promise some lawmakers view as central to keeping their slim congressional majorities in the midterm elections.

Drug industry lobbyists are urging Republican senators to scuttle the drug-pricing language with parliamentary challenges while looking for cracks in the Democrats’ ranks after the industry fought off more aggressive House attempts to impose drug price controls.

“Just pharma is against it, but there is no ‘just’ when it comes to pharma,” one Democratic aide said. “They’re significant. We’ve been hearing from them throughout the year and they were pretty relentless.”

Backers fear both practical and political consequences if the inflation cap is stripped out — warning that drug companies could hike prices for the roughly 180 million people on employer health plans or other private insurance to make up for the revenue they stand to lose from Medicare price negotiations and other provisions of the bill.

Organized labor and groups representing some of the country’s biggest employers have banded with supporters of the inflation caps like Sen. Catherine Cortez Masto (D-Nev.) to lobby key centrist Democrats who could be swing votes, including Sens. Kyrsten Sinema of Arizona, Bob Menendez of New Jersey and Tom Carper and Chris Coons of Delaware.

“We’ve been pretty singularly focused on this and throwing as much energy into this as we can,” said Shawn Gremminger, the director of health policy at the Purchaser Business Group on Health, one of the employer groups working to save the provision.

House passage of the bill, which Speaker Nancy Pelosi vowed will happen the week of Nov. 15, will kick off the next round of the fight over drug pricing. One senior Senate Republican aide said GOP lawmakers are focusing on the drug pricing piece of the legislation as they prepare to bring a raft of challenges before Parliamentarian Elizabeth MacDonough.

At the same time, Democrats are digging in.

“I’ve insisted on [inflation caps] applying to the commercial sector,” Senate Finance Chair Ron Wyden (D-Ore.) told reporters. “What that means is that, not just for seniors but for millions of Americans, their drug prices wouldn’t go up more than inflation unless the companies are willing to pay a penalty.”

“I still have to go through the parliamentarian,” he acknowledged. “But I think it’s going to be okay.”

Democrats have no clear backup plan if the price controls for private insurance are struck down, according to a senior Senate Democratic aide.

“There aren’t that many different mechanisms to go about it,” the aide said. “There aren’t many ways to get at price increases in commercial plans.”

The drugmakers’ big Washington lobby, the Pharmaceutical Research and Manufacturers of America, or PhRMA, declined to comment about its advocacy surrounding inflation caps. But the group’s CEO Stephen Ubl said on Monday that unintended consequences from the Democrats’ drug-price effort “will upend our global leadership in biomedical innovation and undermine the quality of care that patients receive for years to come.” The industry argues drug price controls will eat into R&D spending and result in fewer new cures coming on the market.

Business groups like the U.S. Chamber of Commerce and the Small Business & Entrepreneurship Council that are fighting the broader social spending bill have echoed those industry arguments in objecting to the drug pricing provisions.

The Democrats’ attempts at price controls have to conform with the parameters of the expedited budget reconciliation process they’re hoping to use to pass the social spending package on a party-line vote.

Central to the task is making the case that each line item impacts federal spending or revenues, and doesn’t make policy changes that are “merely incidental” to the federal budget. The Congressional Budget Office has not yet crunched the numbers on how much money the private market inflation caps could save the government, but one estimate from the West Health Policy Center — a nonprofit that studies healthcare costs — pinpoints the figure at roughly $100 billion, due to lower prescription drug costs increasing workers’ take home pay and resulting in higher payroll tax revenues.

Backers of the caps say they’ve consulted with parliamentary experts on the issue and are cautiously optimistic it will survive GOP challenges.

“We’ve heard it’s enough of a budget issue that it should pass muster with the parliamentarian,” said Tom Leibfried, a lobbyist for the AFL-CIO who focuses on health policy. “The cost implications are real. Government revenues will decrease from employers if they have to pay out more on pharmaceutical costs, so this is a budget saver, and CBO has scored things like that for years.”

But some industry lobbyists are flagging concerns that the parliamentarian could view the provision as more policy-based and intended to hold down drug prices in the commercial market, regardless of how much money it saves the government. That would lead to the language getting struck.

It’s an argument that Republicans and the measure’s industry opponents are expected to amplify. And the provision’s supporters fear the longer the process drags on, the more the industry will be able to ramp up efforts to chip away at the policy, if not kill it altogether.

The unions and business groups pushing for the provision say they’re worried some Democrats could get cold feet amid a wave of industry pressure, adding the House’s recent decision to delay a vote on the package only heightening their anxiety.

“I worry that if momentum stalls, and for whatever reason this continues to hang out there past Thanksgiving, it just gets harder,” said Gremminger, who with other advocates is urging Democrats to close ranks so they can fulfill campaign pledges to address drug costs for all Americans.

“Something that we lightly threaten is the fact that it’s critical from a political standpoint,” he added. “If they want to have something that they can really run on 2022, they need to be able to say, ‘Hey, I took steps that are bringing down drug prices for everybody.’”

Cortez Masto, who is up for reelection next year in a swing state with a huge workforce on private insurance, is among the lawmakers who have seized on the issue — winning plaudits from labor.

Geoconda Argüello-Kline, the secretary-treasurer for the politically powerful Culinary Workers Union, said her organization “appreciates legislators who understand initiatives that improve one part of the healthcare system can cause unintended harm to others, and that holistic approaches are needed.”