Dems’ Drug Pricing Bill Could Reduce Federal Spending and Pharma’s Revenue

After hours of debate and more than 300 rejected amendments from Republican legislators, Democrats have advanced House Speaker Nancy Pelosi’s (D-CA) drug pricing bill through the Energy and Commerce Committee and the House Education and Labor Committee.

In the same week, the Congressional Budget Office (CBO) released an analysis finding that the bill, known as the Lower Drug Costs Now Act of 2019, would reduce federal spending on Medicare Part D by $345 billion between 2023 and 2029. Most savings would be derived from the provision that ties prices to what other countries pay for drugs.

On the other hand, the CBO also noted that the bill would affect the pharmaceutical market by “immediately” cutting drug makers’ current and future revenue. If their revenue dropped $500 billion to $1 trillion, the CBO estimates that companies would reduce research and development spending, potentially reducing the number of drugs launched by eight to 15 over the next decade. Republican opposition to the bill focuses in part on its perceived potential to stifle innovation in this way.

“The overall effect on the health of families in the United States that would stem from increased use of prescription drugs but decreased availability of new drugs is unclear,” the agency said in its analysis.

To compensate for the loss of revenue, the agency expects drug makers to launch new medicines in the U.S. at higher prices, to raise prices on certain drugs outside the U.S., and to be less willing to offer discounts in foreign countries.

Source: STAT, October 14, 2019; STAT, October 18, 2019.