Drug, Insulin Price Caps Head for Showdown Over Senate Rules

Senate Democrats expect to defend key portions of their drug-pricing agenda against a technical challenge by Republicans as soon as next week, potentially curtailing crucial parts of their social spending and tax package.

Democrats expect to go before the Senate parliamentarian, a nonpartisan official who oversees that chamber’s rules, during the first days in December to get guidance on whether many of the health policy items in their House-passed bill (H.R. 5376) qualify under budget reconciliation, two senior Democratic aides told Bloomberg Government. That process allows legislation to pass in the Senate with a simply majority vote on the condition that the bill’s provisions are primarily budget related.

Two aides and one health industry lobbyist familiar with the discussions say three major drug-pricing proposals are most in danger of failing to qualify—caps on drug-price increases, new transparency rules for pharmaceutical industry middlemen, and a $35 per-month cap on insulin.

These items are expected to face challenges because they would make changes to private insurance plans, according to people familiar with the discussions. The reconciliation process is supposed to be reserved for legislation affecting the federal budget, so some policy changes for private plans could be considered too tangential.

To increase the reach of their drug-pricing plans, Democrats have sought to apply them as much as possible to employer-sponsored and other private insurance plans, instead of just to Medicare plans.

The caps on drug-price increases—requiring drugmakers that increase their prices faster than inflation to pay back that excess amount to the federal government—are set to apply broadly and amount to a tax on the pharmaceutical industry, the industry lobbyist noted. The reconciliation process allows the creation of new taxes as long as they raise money for the government.

The rebates on drug-price increases would result in a net federal deficit reduction of $83.6 billion over 10 years, according to the Congressional Budget Office.

The requirement that private plans cap the cost of insulin for their beneficiaries at $35 per month could fail a Senate rules test because it simply requires private plans to comply with this new rule, potentially having little effect on federal spending, the lobbyist said. If Republicans choose to challenge this provision, it may have be altered or removed from the package.

Senate Majority Leader Charles Schumer (D-N.Y.) said recently he plans to insist this provision remains in the package because it could save money for millions of Americans who rely on insulin to stay alive.

“I’m announcing that as majority leader, I’ll do everything I can to keep the provision in the BBB,” he said referring to the name of the spending package, the Build Back Better Act.

Also in question is a requirement that pharmacy benefit managers report on the details of their prescription drug benefits to group health plans twice a year. This was also written as a change for private industry, but it includes a penalty that could generate revenue for the government.

To contact the reporter on this story: Alex Ruoff in Washington at aruoff@bgov.com

To contact the editor responsible for this story: Sarah Babbage at sbabbage@bgov.com