Democrats’ Drug Price Plan Is Trimmed by Senate Parliamentarian

Medicare was cleared to negotiate drug prices for the first time by the Senate’s top rules official, though the Democrats’ proposal intended to cap price increases for prescription drugs in the commercial market was blocked.

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(Bloomberg) — Medicare was cleared to negotiate drug prices for the first time by the Senate’s top rules official, though the Democrats’ proposal intended to cap price increases for prescription drugs in the commercial market was blocked.

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The Senate parliamentarian, Elizabeth MacDonough, ruled that most of the drug-price bill is eligible for a fast-track budget process whereby Democrats, who have a narrow majority in the chamber, can pass legislation without the threat of a Republican filibuster.  The drug price provisions are part of a budget bill that the Senate plans to begin debating later Saturday. 

The rules official found, however, that some provisions aimed at stopping drug companies from raising prices faster than inflation aren’t allowed. 

“Democrats have received extremely good news: for the first time, Medicare will finally be allowed to negotiate prescription drug prices, seniors will have free vaccines and their costs capped, and much more,” Senate Majority Leader Chuck Schumer said in a statement. 

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“While there was one unfortunate ruling in that the inflation rebate is more limited in scope, the overall program remains intact and we are one step closer to finally taking on Big Pharma and lowering Rx drug prices for millions of Americans,” he said. 

The parliamentarian earlier in the day ruled that energy tax credits, including for the purchase of electric vehicles, can be allowed in the bill. 

MacDonough found that under Senate rules the inflation provisions of the bill were not primarily budgetary in nature. Under the legislation, drug makers would be required to rebate the government for increasing the price of their products above inflation.

The bill would still allow Medicare to negotiate the prices for drugs it provides under Part B and Part D for the first time and would have applied a tax to companies failing to comply with the negotiated price, and applied a $2,000 cap on annual out-of-pocket expenses for people enrolled in Medicare Part D. Those parts have been approved, according to Schumer. 

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Limiting the inflation rebates to just Medicare means that drug makers can still annually raise prices for the two-thirds of Americans younger than 65 who have private health insurance. It will also limit some of the savings from the drug pricing provisions of the legislation, although how much is unclear.

The inflation rebate is allowed to be applied to Medicare prices, but not in the commercial market according to two people familiar with the ruling.

Under Senate rules designed by late West Virginia Senator Robert Byrd, provisions must be fiscal in nature rather than primarily regulatory in order to qualify for the fast-track budget reconciliation process. 

Senator Joe Manchin of West Virginia recently backed a package of $369 billion in climate and energy provisions as well as a 15% corporate minimum tax, increased tax audits and three years of Obamacare premium subsidies.  Holdout Senator Kyrsten Sinema this week signed off on the package after paring back the minimum tax to spare depreciation tax deductions, eliminating a change to carried interest taxes and inserting a 1% stock buyback tax. 

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Last December, Manchin, who succeeded Byrd in the Senate, walked away from talks on a $2 trillion measure that would have provided child tax credits, paid family leave, childcare subsidies, Medicare hearing coverage and other social benefits. His vote is essential to any agreement.

The drug bill was the proposed funding mechanism for a plan to extend Obamacare premium subsidies that are set to expire in January. The bill was estimated to save the government $288 billion over 10 years, providing a funding stream for the subsidy spending.

Losing the inflation caps entirely would cost Democrats at least $36 billion, according to the Congressional Budget Office’s previous estimate of the provision. CBO has told Democrats their total drugs package would reduce spending by $288 billion.

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