The Upsides And Downsides Of The Drug-Price Reform Bill

Speaker Pelosi’s massive budget bill includes language designed to lower prescription drug prices — and destroy medical innovation.

While the text contains several good ideas, they’re overshadowed by others that would do great harm.

Let’s start with the good news. The bill would introduce an out-of-pocket spending limit of $2,000 for patients enrolled in Medicare Part D, as well as a co-pay limit for insulin of $35 per month. These caps would directly help patients. Bravo.

The legislation would also require pharmacy benefit managers (PBM) — the big but little-known firms that negotiate with drug makers on behalf of insurers — to publicly report on the discounts and rebates they obtain from drug companies. Currently, these insurance-industry middlemen are notorious for helping themselves to a fatter bottom line while failing to pass their substantial discounts on to patients at the pharmacy counter. 

The PBM reporting requirement would bring some welcome transparency to a shadowy corner of health care. When outside watchdogs are able to see how little patients benefit from billion-dollar rebates, insurers may feel pressure to pass more savings on to consumers. As the late Sen. Everett Dirksen said, “When I feel the heat, I see the light.”

Alas, that’s where the good news ends. The ill-considered centerpiece of the Democrats’ plan is a provision that would give unelected Washington officials the power to decide the price of certain medications. 

The House majority falsely positions this effort as “direct government negotiations” with drug makers. But that’s just a euphemism. It means price controls that the government imposes on a take-it-or-leave-it basis. Price controls equal choice controls.

The federal government, through the behemoth Medicare program, is too massive a purchaser for drugmakers to walk away from even if they wanted to. This ill-considered legislation would impose a 95% excise tax on a drug’s gross sales for any company unwilling to play ball. This is what happens when Uncle Sam becomes the Godfather with an offer you can’t refuse.

And while it limits the initial rounds of “negotiations” to 20 popular prescription medications, the clear intention is to grow that number over time to encompass almost all brand-name medicines on the market — including the latest breakthrough treatments.

This will chill investment into future drug research, hurting patients everywhere. 

Price controls will shrink existing industry research and development budgets — directly resulting in fewer new vaccines, diagnostic tools, and treatments — to the ultimate detriment of current and future generations of patients. Not acceptable.

It took many months for centrist and progressive Democrats to arrive at this devil’s compromise. And the bad still far outweighs the good. However, there is still time for Congress to strike elements of the bill that would choke off future medical innovation — while leaving intact the parts that will prevent seniors from being overwhelmed by prescription drug costs. 

Peter J. Pitts, a former FDA Associate Commissioner and member of the United States Senior Executive Service, is President of the Center for Medicine in the Public Interest and a Visiting Professor at the University of Paris School of Medicine.