The Senate Finance Committee on July 25, 2019, advanced sweeping drug pricing legislation, "The Prescription Drug Pricing Reduction Act of 2019" by a 19-9 vote. The legislation includes over two dozen bipartisan proposals that include capping out-of-pocket expenses for Medicare Part D and closing the Part D "donut hole" by redesigning its coverage benefit. All the "no" votes were Republicans, many of whom oppose a provision to cap drug price increases in Medicare Part D at the rate of inflation, due to concerns that it is tantamount to price controls. An initial estimate by the Congressional Budget Office (CBO) found that the bill would save $100 billion over 10 years and would lower premiums and out-of-pocket costs for Medicare beneficiaries.

A amendment by Sen. Pat Toomey (R-PA) to strike the Part D inflation cap was blocked by a 14-14 vote, as was another Toomey amendment that would have barred the government from establishing an international pricing index for Medicare Part B drugs — one of President Trump's significant drug pricing policies — which also failed by a 14-14 vote. In contrast, Democrats expressed the desire for the bill to go even further, with an amendment by Sen. Debbie Stabenow (D-MI) to allow Medicare to directly negotiate drug prices failing 12-16.

Chairman Chuck Grassley (R-IA) and Ranking Member Ron Wyden (D-OR) expressed openness to working with the committee on additional changes to the bill in the coming weeks, in response to criticism that there was insufficient time for members to provide feedback and that more work needs to be done. Grassley said he hopes to include a version of the Trump administration's recently withdrawn rebate rule in the next iteration of the bill, which would require all Medicare rebates be passed on directly to consumers, and both Grassley and ranking member Ron Wyden (D-OR) agreed to address concerns about Direct and Indirect Remuneration (DIR) fees. Wyden, however, also said that Democrats would not move forward with a floor debate on the legislation until two priority amendments are given votes: one to protect people with preexisting conditions and another to allow for Medicare price negotiation. The bill will not be considered on the floor until after the August recess; if it is considered, it would likely need to be combined with another sweeping package from the Senate HELP Committee, which includes a handful of drug pricing provisions, along with drug pricing measures passed out of the Judiciary Committee.

For additional details on the hearing, see the attached Tax Alert or click here.

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ATTACHMENT

Prescription Drug Pricing Reduction Act