One of the most important parts of Democrats’ Build Back Better legislation is also among the most politically difficult.
It’s an attempt to make prescription drugs more affordable by having the government regulate prices — an idea that, however popular, has never gotten past the opposition of conservatives in Congress and their allies in the pharmaceutical industry. With Democrats apparently a few votes short of what they need to pass such legislation this year, plenty of lawmakers, officials and political professionals are convinced this latest attempt will fail too.
Senate Finance Chairman Ron Wyden (D-Ore.) isn’t one of them. In a recent interview with HuffPost, he said he remains confident that Democrats will ultimately get behind reforms that produce significant savings for taxpayers, employers and individuals buying drugs at the pharmacy counter.
“We’re going to get this done,” Wyden said. “It’s too important. It matters too much to the lives of so many people.”
That belief could be sheer bravado ― or perhaps unfounded optimism from the famously earnest, preternaturally upbeat senator who has been working on health care for his entire political career. But several sources who favor strong government action on drug prices and are privy to negotiations have told HuffPost they have the same impression.
They think that passing something is more likely than passing nothing. They also think the final legislation is likely to include versions of two ideas they’ve long touted: direct government negotiation of prices and limits on year-to-year increases. These are the same provisions that Wyden has said all year long must be part of legislation.
But the same sources also issued a warning. Simply including those provisions isn’t enough. They have to be meaningful ― as in, they have to bring down the price of drugs significantly.
Wyden says he is optimistic here too. But the details matter a lot, and it is over those details that officials, lawmakers and lobbyists are arguing right now.
A Chance For Drug Legislation, Finally
The case for action on prescription drugs is straightforward: Americans pay a lot more for their drugs than counterparts overseas because the U.S. is the only economically advanced country where the government doesn’t get directly involved in setting prices. Democrats have been promising to change that ever since the early 2000s, when a Republican-written law creating the drug benefit for Medicare beneficiaries explicitly prohibited such government interference.
The closest Democrats have come to doing this so far was two years ago, when House Democrats passed H.R. 3, the Elijah E. Cummings Lower Drug Costs Now Act.
Under H.R. 3, the federal government would choose a subset of drugs ― at least 25 in the program’s first year, 50 starting with the second ― from among the pharmaceuticals the country spends the most on. It would then negotiate the prices of these drugs directly with manufacturers, with a stipulation that the drugs couldn’t cost more than an “international index” based on the average of what several peer countries (like Germany and the U.K.) pay.
H.R. 3 was a compromise among different factions within the Democratic House caucus; progressives in particular wished it could have applied negotiations to a larger group of drugs. But it had potential to generate significant savings ― and not just for seniors on Medicare. Private insurers, employers and individuals could all take advantage of the same prices. Drugmakers would be free to ignore the negotiations and sell at a higher price, but if they did so the government would slap them with a tax that would dramatically reduce profits.
The bill died because the Senate, then under Republican leadership, refused to take it up. Democrats had been hoping to resurrect the bill or something like it now that they control both houses of Congress and the White House, as well.
President Joe Biden has gotten fully on board with the cause, in part because the budget savings (through lower Medicare spending) from drug price regulation could help offset the cost of other health care initiatives, like extending dental benefits to seniors and covering low-income people in states that have not expanded Medicaid.
But getting aggressive legislation through Congress is proving difficult, even in the House, where Democrats have a much smaller majority than they did in 2019. It means that Speaker Nancy Pelosi (D-Calif.) can afford to lose no more than three votes, and already a handful of Democrats ― all with ties to the drug industry ― are insisting on less aggressive price regulation, even though they voted for H.R. 3 when it came up two years ago.
The Senate And The Senator From Oregon
The Senate has been, if anything, more difficult. With no prospect of GOP support, Democrats need all 50 of their caucus members to support legislation. Two in particular have been difficult sells: Bob Menendez of New Jersey, which is home to 14 of the world’s 20 largest drug companies, and Kyrsten Sinema, who especially lately has been pulling in drug company donations.
Wyden is in the middle of the ongoing negotiations, partly because the Finance Committee has direct jurisdiction over Medicare and Medicaid, and its staff handles the bulk of the policy work on drug legislation. Plus Wyden has a long history of working ― and wonking out ― on health care, going back to the 1970s when he an advocate for seniors in the Gray Panthers organization.
Two years ago, while House Democrats were writing their bill, Wyden worked with Chuck Grassley, then the GOP finance chairman, on a bipartisan piece of legislation that didn’t have negotiation but did have a version of “inflation caps” ― basically, limits on how much drug companies could raise prices year after year.
That legislation, which Senate Republican leaders also refused to bring to the floor, gave advocates reason to think Wyden was personally invested in the cause of drug price reform. But it also worried some who thought he might make another futile effort at bipartisanship and push a bill that didn’t include price negotiation, the key component of H.R. 3.
Wyden made clear that wasn’t his intention ― that he was willing to write a bill only Democrats would support and that he was determined to include negotiation, which was a position he’s long endorsed. He reiterated that position as recently as Thursday in a Capitol Hill scrum with reporters.
“Let’s have no confusion about it,” Wyden said. “We will not give up on negotiation.”
“We’re going to insist upon it and we’re going to go to the mat for it,” Wyden added when asked to clarify what he meant. “I don’t know how I can be more blunt about that.”
The Meaning Of ‘Negotiation’
Peters, whose San Diego-area district includes a number of smaller drug companies, is a longtime skeptic of aggressive government intervention on prices. Earlier this year, he introduced an alternative to H.R. 3 ― and it included a form of negotiation, almost certainly because the idea is so popular that even Peters felt compelled to endorse the concept publicly.
Of course, the actual negotiation scheme in the Peters bill is conspicuously weak.
It limits negotiation to only a small subset of drugs, and it doesn’t limit the range for negotiated prices as tightly as H.R. 3 would. And that’s the big worry as Wyden, Senate leadership and the rest of his colleagues hash out what negotiation would look like in their version of legislation ― that the compromises necessary to get it past Menendez and Sinema and any other skittish senators would substantially weaken its effect.
Wyden has already acknowledged one concession publicly: Because too many senators objected to H.R. 3’s “international index” for setting the price range on negotiations, the bill will likely use some sort of “domestic index” instead.
One way it might work, sources have said, is that the government would go back to the launch price of a drug, use one of several available figures for what private insurers actually paid for the drug at the time, adjust it by some percentage and account for inflation ― and then use that figure for the upper limit on what a drug company could charge.
In principle, such a scheme could generate just as much savings as the one in H.R. 3. But it really depends on other key variables, like whether the program includes more or fewer drugs, has different formulas for different kinds of drugs, even something as technical as which launch price average is the basis for calculations. There’s an “average manufacturers price,” a “average wholesaler’s price,” and so on. Each has different factors built into it.
A lot would also depend on the negotiation process for new drugs, as opposed to those that have been on sale for a while.
The Other Part Of The Bill
The other key component of drug legislation, limiting year-to-year inflation, matters too, although it’s gotten far less attention publicly.
Wyden has been just as insistent that final legislation include some form of these “inflation caps,” and because Democrats are so determined to generate real savings ― for individual consumers as well as employers and taxpayers ― there’s been talk of making those inflation caps even more aggressive, to make up for the weaker negotiation provisions. One source told HuffPost a few weeks ago advocates were hoping for “inflation caps on steroids.”
The inflation caps could be crucial for another reason. Extending negotiated prices beyond Medicare to the private sector, as H.R. 3 envisioned, may not be possible under the byzantine rules that govern the budget reconciliation process, which is the parliamentary procedure Democrats are using to pass legislation. But extending inflation caps may be OK, because they have a different policy mechanism that would satisfy reconciliation rules, at least as the Senate’s parliamentarian interprets them.
The same factors that make inflation caps potentially effective at generating savings also make them politically difficult: The drug industry doesn’t like them. And in arguing against any of the provisions, the industry and its allies ― including Peters and a few other House Democrats ― have cited the potential danger to innovation.
Significantly curtailing industry profits, they say, will make it harder for drug companies to attract investment money, given that drug research is inherently risky ― especially when it comes to the smaller biopharma firms working on cutting-edge treatments. Restrict drug spending too much, the theory goes, and it will mean fewer miracle cures in the future.
Most experts believe that reducing drug industry revenue could, in principle, reduce the number of innovations. The debate is over whether the legislation under discussion would actually have that effect, how big the effect might be, and whether reducing the number of drugs would actually mean fewer breakthroughs.
As advocates like to point out, much of what passes for “innovation” these days are drugs of questionable clinical value. They say legislation could actually push drug development in the direction of higher clinical value ― in other words, to get more breakthroughs rather than fewer ― by having the federal government invest more in research and development.
Wyden has long identified that as a core goal, promising to spend more on the National Institutes of Health, which develops the basic science that leads to drug breakthroughs. He has also stressed the need to support smaller firms that are doing most of the innovating today.
The federal government already has one program, called the Small Business Innovation Research fund, which effectively offers venture capital to startups through a number of agencies. A Democratic drug bill could add money to this fund and target it at drug development.
15 Minutes To A Deal
Wyden wouldn’t say whether that was the specific idea he had in mind, just as he declined to talk about the negotiations with specific senators. And he’s been careful to warn that the final legislation will have compromises, like the idea of a “phase-in” for certain provisions that he floated ― without details ― on Thursday.
But amid all the public skepticism about the state of legislation, on drugs specifically and the Build Back Better bill more generally, Wyden told HuffPost that he and his colleagues were making a lot more progress than it might seem from the outside.
“I was never under any illusions that this was going to be a walk in the park,” Wyden said. “But these things are always impossible ― until 15 minutes before they come together.”
That moment may come very soon, at which point people can stop asking whether there will be a deal and start asking what the deal looks like.