It’s no secret that prescription drug prices in the U.S. are far higher than in other countries and that the current system costs taxpayers, insurance plans and people far more than it should. A huge barrier has been language in the Medicare law prevents HHS from directly negotiating drug prices under the Medicare Part D drug benefit program.
Achieving prescription drug pricing reform (allowing Medicare to negotiate drug prices) has been out of reach for decades because the drug company lobby is so powerful that meaningful reform has been impossible.
That may be changing. President Biden mentioned that one of his priorities include allowing Medicare to negotiate on behalf of people enrolled in Medicare Part D drug plans, a proposal which has strong and bipartisan public support.
The US House of Representatives has already passed a measure called “H.R. 3, the Lower Drug Costs Now Act of 2019” which would require HHS to negotiate the price of between 25-125 brand-name drugs without generic competitors. That negotiated price would be available Medicare, Medicaid and private payers. Importantly, HR 3 also provides some negotiating leverage to HHS.
For one thing, it would establish an upper limit for the negotiated price equal to 120% of the Average International Market price paid by Australia, Canada, France, Germany, Japan, and the UK.
It would impose financial penalties on drug companies that don’t comply with the negotiating process. Manufacturers that fail to negotiate would face an escalating excise tax on the previous year’s gross sales of the drug in question, starting at 65% and increasing by 10% every quarter to a maximum of 95%.
This is such a common sense intervention that would help both Medicare beneficiaries and the Medicare Trust Fund. Let’s hope that there is finally enough support in congress to pass this long needed reform.