Senate Committee Approves Plan to Alter Medicare Drug Pay

Kerry Dooley Young
July 26, 2019

An influential Senate panel on Thursday approved a package of legislative proposals seen as likely to reduce spending on medicines by as much as $100 billion over a decade. However, it may increase the risk for physician practices to be "underwater" when providing certain medicines.

The Senate Finance Committee voted 19–9 in favor of the package, known as the Prescription Drug Pricing Reduction Act. Both of the major drugmakers' lobbying groups, the Pharmaceutical Research and Manufacturers of America (PhRMA) and the Biotechnology Innovation Organization (BIO), raised strong objections to the legislative package, as did the American Society of Clinical Oncology (ASCO) and the Community Oncology Alliance (COA). AARP supports the Senate Finance Committee package, praising its potential to save seniors money.

The Senate Finance Committee package includes several provisions intended to reduce the amount Medicare, Medicaid, and consumers spend on drugs. It is unclear whether the Senate will ever vote on this package. Still, the bipartisan support shown at the committee meeting for measures contained in the package signals that lawmakers might revisit these ideas, even if the package in its entirety does not progress. Some of the package's proposals might be considered, for example, as potential offsets needed to allow new spending in a later congressional budget deal or tax bill.

The Senate Finance Committee's legislative package reflects lawmakers' continued unease about how Medicare purchases medicines, including its paying a premium to average sales price (ASP) for drugs administered by physicians. Drugs in this category include many cancer and rheumatoid arthritis treatments.

Senate Finance Committee Chairman Charles E. Grassley (R-IA) said lawmakers are seeking to address incentives in the Medicare Part B program that now favor use of more expensive drugs, even when a less expensive drug could be prescribed. Part B applies a premium to the reported ASP of medicines. (The premium originally was set at 6% of ASP, but subsequent budget cuts have lowered that to about 4.3%.)

Oncology groups objected to the Senate Finance Committee's plan to factor into Medicare Part B's drug payment the amount pharmaceutical companies have contributed from patient assistance programs, such as coupons and financial support. This change could produce savings of as much as $1.45 billion over a decade, the Congressional Budget Office said in a July 24 report.

In a statement on the Senate Finance bill, COA said the proposed change in Part B reimbursement would lead drugmakers to "reduce or eliminate these critically important" financial assistance programs. In a letter sent Thursday to the Senate Finance Committee, ASCO raised similar concerns about patients. The group also emphasized the potential financial risk for oncology practices.

The change proposed in the Senate Finance bill would increase the risk for practices to be "underwater" when providing certain medicines, "meaning that the practice pays more for the drug than they are reimbursed by Medicare if it does not result in lower list prices as intended," wrote Howard A. "Skip" Burris III, MD, president of ASCO, in a July 25 letter to Senate Finance.

Still, ASCO appeared supportive of other aspects of the Senate Finance bill, including a bid for greater transparency of the flow of discounts to pharmacy benefit managers.

In addressing drug costs, lawmakers must keep the pharmaceutical industry funded well enough to enable it to develop new medicines while seeking to make those treatments affordable, said Sen. Bill Cassidy, MD (R-LA). In discussing healthcare policy in Congress, Cassidy often refers to the challenges he saw his patients face when he practiced medicine in poor communities in Louisiana.

"If the patient cannot afford the medicine, it is as if the innovation never occurred," Cassidy told reporters on a call after the Senate Finance Committee approved the bill.

Cassidy was one of six Republicans to join the committee's Democrats in supporting the legislative package. It also had the backing of Senate Finance Chairman Charles E. Grassley of Iowa, Rob Portman of Ohio, Steve Daines of Montana, Todd Young of Indiana, and John Cornyn of Texas.

Significant Industry Opposition

There has been significant opposition to the Senate Finance Committee package.

In a statement, PhRMA described the Senate Finance package as "the wrong approach to lowering drug prices." The trade group for large drugmakers shared many of the concerns raised by BIO, which represents biotechnology companies.

BIO said the Finance Committee's "proposal does almost nothing to hold insurance companies and middlemen accountable for shifting more of the cost burden onto patients."

Drugmakers were disappointed when the Trump administration recently scuppered a proposed rule that would have directed savings from rebates to consumers in Medicare Part D plans. At the start of the hearing, Grassley spoke in support of this concept, calling it a "good idea."

"The administration threw us a curve ball a couple of weeks ago when they did not finalize a proposed rule," Grassley said at the Finance Committee's meeting on the legislative package. "That rule would have ensured that the savings from rebates in the Part D program would be passed through to benefit seniors at the pharmacy counter."

Grassley said he would like to work with Sen. Ron Wyden of Oregon, the committee's ranking Democrat, to try to have a similar policy regarding rebates enacted into law.

Grassley, Wyden, and their colleagues face many hurdles in their attempt to pass legislation affecting drug prices. Comments made by Wyden at the start of the Finance Committee's markup session on Thursday raised questions about whether broader healthcare politics might delay this work.

Wyden said Democrats may not allow the full Senate to begin debate on the drug package unless the chamber also considers two issues they support. Democrats would want a chance to vote to reaffirm the preexisting condition mandates created by the 2010 Affordable Care Act, which compels insurers to provide coverage for people who have known medical illnesses. Democrats also would want a chance to consider allowing Medicare to directly negotiate with drugmakers, instead of using insurers as middlemen in the Part D pharmacy program.

Although it is only July, the number of days for lawmakers to work on innovative policy changes may be dwindling. The Senate is scheduled to begin a roughly month-long recess on August 5. Much of Congress' time in September may be devoted to getting new funding in place for federal programs ahead of the start of fiscal 2020 on October 1.

Any major legislation left uncompleted at the end of 2019 faces a higher hurdle against passage in the following year. Reaching bipartisan compromise may become more difficult as the 2020 election approaches.

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SOURCE: Medscape, July 26, 2019.

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