Details of Democratic House Speaker Nancy Pelosi's closely guarded drug pricing plan are no longer gone and she is not getting mixed up.
The draft proposal outlined in a document first received by the Bloomberg government would entitle Medicare to directly negotiate the price of 250 expensive drugs – focusing primarily on drugs that lack strong competition – and give the government sharp teeth in these conversations. Drug prices will be tied to their average price in a basket of developed countries that have more affordable drugs, and pharmaceutical companies that refuse to negotiate or extend lower prices to other parts of the health care system will face significant fines.
Pelosi's plan may still change before its official release, but it looks like a dramatic change to the left for her party, who earlier might have been happy to have just given Medicare the right to bargain over drug prices . It is also a stark contrast to the light bilateral effort on drug spending in the Senate, which does not even touch on this point. Only the negotiations are likely to have a relatively minor impact, as the government will have no leverage unless it is ready to take the politically difficult step of refusing to cover some drugs. It is the addition of price index and penalties that make this bill a much greater threat to the market power and profitability of drug manufacturers.
The proposal is so aggressive in its current form that it has little chance of being controlled by the Republican Senate. This does not mean that the pharmaceutical industry can breathe easily.
Pelosi's plan is an effort to pressure the Senate and the Trump administration to take more aggressive action and give Democrats a strong attack on an issue that resonates with voters. It can simply succeed on both fronts; Drug pricing is an area in which Republicans are vulnerable.
Drug spending is a policy priority for President Donald Trump, and his populist tendencies are already shifting Republican Orthodoxy to the issue. He proposed an international price index for some drugs, which has clear similarities to Pelosi's plan, though much more limited in scope. Although his administration indicated early support for the Senate package, Pelosi's more ambitious alternative made it much harder to stop there. That is, unless you think the president will be ready and take the charge that he is soft on drug prices.
Trump will not be pressured not only by Pelosi, but by the entire democratic presidential field. The entire group supports allowing Medicare to negotiate drug prices. A number of them want to go even further by limiting start-up prices or withdrawing patents from companies that stubbornly insist on excessive prices.
Pelosi's diversion from the Senate proposal makes it less likely for us to see major drug pricing legislation passed before 2021. The desire to deny Trump the opportunity to sign a drug pricing bill may even be another reason. that the proposal is so aggressive, this should provide only limited comfort for pharmaceutical managers and investors as the price debate moves into hostile territory.
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Max Nissen is a colonist at Bloomberg Opinion, covering biotechnology, pharmacy and healthcare. Previously, he wrote about management and corporate strategy for Quartz and Business Insider.
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