The centerpiece of the House Democrats' bill would require the government to negotiate the cost of up to 250 brand-name drugs that don't have competition and cost the U.S. health care system the most money. Insulin for diabetes would have to be included. The maximum price negotiated would be capped: It couldn't be more than 120 percent of the average price charged in other industrialized countries that typically pay less than the United States. Drug companies would either play ball or face an excise tax starting at 65 percent and rising to 95 percent. Private insurance plans could also use the negotiated prices.
The nonpartisan Congressional Budget Office estimated this part of the bill would save $456 billion over a 10-year period. It’s projected to cost drug companies at least $500 billion in revenue, which CBO predicts would cut research funding and result in about eight fewer new drugs coming to market in the first 10 years the law was in effect, and 30 fewer drugs in the following decade.
The legislation also tries to restrain companies’ abilities to launch new drugs at astronomical prices by allowing the government to negotiate the cost of any medicines that come to market at list prices higher than the U.S. median household income. The plan would also cap seniors' annual out-of-pocket spending for outpatient prescription drugs at $2,000.
Trump has dropped his promise to allow Medicare to negotiate the cost of drugs, but Pelosi’s bill borrows from some other parts of his drug pricing agenda, including tying the cost of medicines to cheaper prices in other developed countries. The White House also supports establishing an out-of-pocket cap for seniors, and then when seniors hit the catastrophic part of the drug benefit, shifting more of the burden from the government to health insurers. The administration has also called for establishing an inflation-based limit on reimbursement for physician-administered drugs, just like Pelosi’s bill would do.
Pelosi’s bill also calls for inflation-based penalties on drugs purchased at the pharmacy counter. The White House hasn’t been a huge proponent of this idea, which is vehemently opposed by many Republicans in Congress, but Trump reluctantly signed on to the policy by supporting the Senate Finance Committee’s drug pricing package championed by Republican Sen. Chuck Grassley of Iowa and Democrat Ron Wyden of Oregon.
For months, the White House and Pelosi’s office indicated they were in active discussions on her bill. In October, the White House changed its tune and launched a full-scale attack.
Impeachment proceedings haven't helped in getting Trump and Pelosi together on a drug pricing deal. But it’s not clear they would have agreed in the long run, anyway: Trump’s senior health advisers, including HHS Secretary Alex Azar and domestic policy adviser Joe Grogan, oppose direct government negotiation of drug prices.
The White House framed its increasing opposition to the Pelosi bill as a practical matter: Senate Majority Leader Mitch McConnell said her plan is dead on arrival in the Senate. So the White House is playing up the Grassley-Wyden bill, which has a higher likelihood of getting to Trump’s desk — though most Republican senators also oppose that legislation.
She carefully crafted legislation that could appeal to diverse wings of her caucus.
Moderate Democrats pushed for a bill that could become law and wasn’t just a messaging document. Progressives argued that since no Pelosi bill would get the time of day from McConnell, the party should go bold.
The Pelosi bill attempts to appease both camps by focusing on government price negotiations for the highest-cost, highest-use drugs that enjoy patent-protected monopolies. Unlike previous Democratic attempts at drug price negotiations, it contains hefty sticks to guarantee the government gets prices down for those drugs. But it would allow the status quo to prevail for most medicines, letting the private market continue to dictate their prices.
Progressive Democrats appeared to have the upper hand over moderates as the bill went through its final iterations. By threatening to block the bill from getting a vote if Pelosi didn't make last-minute changes, progressives won two big last-minute concessions, expanding the scope of the legislation.
Expected House passage of the legislation Thursday will largely work as a messaging bill that helps shape the Democrats’ 2020 campaign platform, but elements that align with the bipartisan Grassley-Wyden package could catch a ride on must-pass end-of-year bills.
But Pelosi is unlikely to want to give Trump a victory on health care without achieving something big in return.
CLARIFICATION: This report has been updated to reflect the CBO's latest assessment of H.R. 3. The bill would save $456 billion over a decade.