Senators unveil compromise to reduce drug costs for seniors

Two senior senators—a Republican and a Democrat—unveiled compromise legislation Tuesday to reduce prescription drug costs for millions of Medicare recipients, while saving money for federal and state health care programs that serve seniors and low-income people.

Iowa Republican Charles Grassley and Oregon Democrat Ron Wyden said Tuesday the bill would for the first time limit drug copays for people with Medicare’s “Part D” prescription plan, by capping patients’ out-of-pocket costs at $3,100 a year starting in 2022.

It would also require drugmakers to pay a “price hike penalty” to Medicare if the cost of their medications goes up faster than inflation.

The senators announced a Thursday vote on the package by the Finance Committee, which oversees Medicare and Medicaid. Grassley is the panel’s chairman, while Wyden serves as the senior Democrat.

The White House encouraged the Senate negotiations, but Democrats controlling the House want to go farther by granting Medicare legal authority to directly negotiate prices with pharmaceutical companies. Direct negotiations are seen as a nonstarter in the Republican-controlled Senate, but the bill’s drug price inflation penalty may yet find support among Democrats in the House.

Authors of the Senate bill said it will reduce costs for patients and taxpayer-supported government programs, while forcing drugmakers and insurers to take greater responsibility for keeping prices in line.

The legislation does not directly address the problem of high launch prices for new medications, but its inflation rebates could put the brakes on price hikes for mainstay drugs such as insulin. Nonetheless, the proposed changes are likely to encounter stiff resistance from the drug industry.

Other provisions of the Finance Committee bill would:

• Change an arcane Medicaid payment formula through which drugmakers can avoid paying rebates on certain drugs, depending on fluctuations in prices.
• Allow state Medicaid programs to pay for expensive gene therapy treatments on the installment plan, spreading out the costs over several years.
• Require drugmakers to provide public justification for new high cost drugs or steep hikes in the prices of existing medications.
• Require middlemen known as pharmacy benefit managers to disclose details of the discounts they are negotiating and how much they are passing on to consumers. The benefit managers negotiate with pharmaceutical companies on behalf of insurers and consumers.
• Provide doctors with new computer tools they can use to estimate out-of-pocket medication costs for patients with Medicare.

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