Democrats Strike Deal to Let Medicare Negotiate Drug Prices

Senate Democrats on Tuesday announced they have reached an agreement on a plan to lower the prices of some drugs covered by Medicare. The proposal, part of Democrat’s $1.85 trillion spending bill, would empower the federal government to negotiate prices directly with drugmakers on a limited basis for the first time in the history of Medicare, marking a historic shift that pharmaceutical companies have resisted for decades.

“Today we’ve taken a massive step forward,” Senate Majority Leader Chuck Schumer (D-NY) said as he announced the agreement.

The plan is far shy of what some Democrats had hoped for, though, since it limits the government’s negotiating power to a subset of drugs. Under the agreement, the full details of which have not yet been released, the 10 drugs that cost Medicare the most would be subject to price negotiations starting in 2023, with the list of drugs growing to 30 over a period of years.

In a further limitation, the set of drugs that can be negotiated will be limited to those that no longer have "exclusivity," or protection from generic competition. The plan includes a $35 per month cap on the cost of insulin for those in Medicare, as well as a $2,000 per year cap on out-of-pocket expenses for drugs. And it would penalize drugmakers that raise prices faster than inflation, in both Medicare and commercial health insurance plans.

Larry Levitt of the Kaiser Family Foundation said the scaled-back agreement is significant nonetheless. “The emerging Democratic deal on drug costs is more modest across the board than the original aspiration, but it still checks all the boxes,” Levitt tweeted.

Senate Finance Chairman Ron Wyden (D-OR) said the plan would save hundreds of billions of dollars and set an important precedent that the government can negotiate the prices of drugs covered by Medicare. “The prohibition on negotiation has almost been like a curse,” Wyden said. “There was a sense the government had its hands tied behind its back. And now a precedent is being set that starting right out of the gate there’s going to be negotiation on the most expensive drugs — cancer drugs, arthritis drugs, anticoagulants.”

Three Democrats who resisted earlier efforts to give the federal government the power to negotiate drug prices – Sen. Kyrsten Sinema (AZ) and Reps. Scott Peters (CA) and Kurt Schrader (OR) – helped broker the agreement and signaled they would support it.

“It’s not everything we all want,” Schumer said. “Many of us would have wanted to go much further, but it’s a big step in helping the American people deal with the price of drugs.”

Stephen Ubl, the president and CEO of drug industry trade group PhRMA, panned the deal: “While we’re pleased to see changes to Medicare that cap what seniors pay out of pocket for prescription drugs, the proposal lets insurers and middlemen like pharmacy benefit managers off the hook when it comes to lowering costs for patients at the pharmacy counter. It threatens innovation and makes a broken health care system even worse."