The pharmaceutical industry is preparing to take a hit in Democrats’ next major legislative package — and the long-untouchable powerhouse is racing to contain the damage.
Democratic lawmakers are weighing whether to include drug pricing measures that could extract tens of billions of dollars from the industry, or potentially more, to help pay for a massive infrastructure bill they could try to pass along party lines this summer.
A renewed debate over whether to allow the government to negotiate drug prices, which is strongly opposed by pharma and Republican lawmakers, could become a watershed moment for an industry that’s unaccustomed to losing — and survived the Trump era largely unscathed, even as the previous president found rare common ground with Democrats in bashing high drug prices. But those with knowledge of initial discussions told POLITICO that Democratic lawmakers appear intent on using their razor-thin congressional majorities to finally push through a drug pricing overhaul for at least one simple reason: It’s one of the few issues under consideration that would save money in a sprawling package expected to cost trillions.
“The huge difference between drug prices and literally everything else out there: Everything else costs money, and this one saves money,” said Alex Lawson, executive director of Social Security Works, whose group is in close contact with congressional staffers on drug pricing.
The long-running drug pricing debate, propelled by bipartisan voter anger over high medicine costs, had been stalled by the pandemic before it sprang back to life last week with two major developments: House Democrats began exploring whether to include negotiations in the forthcoming infrastructure package, and one of the pharmaceutical industry’s most vocal critics, Sen. Bernie Sanders (I-Vt.), abruptly scheduled the first hearing on drug prices in the new Congress for Tuesday.
The hearing announcement jolted some pharma lobbyists, who told POLITICO it signaled the industry could become the “piggy bank” for the infrastructure bill. It also underscored the challenge the industry faces in trying to use the pandemic to alter its perception from price-gougers to world-savers.
POLITICO spoke with more than a dozen industry lobbyists, Hill aides and advocates about revived talks over drug prices. Many of them requested anonymity to share sensitive discussions that are still in the early stages.
“Something is coming. We’re just not sure when,” said one drug industry lobbying source.
Democratic leaders are widely expected to advance the infrastructure package using a budget maneuver known as reconciliation, which would allow them to pass it with simple majorities in both chambers. That could let them tack on party priorities on health care, climate change and other policies that could otherwise fall victim to the Senate filibuster.
House Democratic leaders are still examining whether their negotiation bill, numbered H.R. 3 (116) in the previous Congress, would satisfy the complex requirements for reconciliation, which they recently used to deliver the $1.9 trillion Covid relief plan along party lines.
Some drug industry lobbyists told POLITICO they believe that enough Senate moderates may have reservations about the House bill and the way it would, for example, limit the maximum negotiated price to what’s paid for the drug in other developed countries. Those lobbyists also believe the industry’s hand has been strengthened by the rapid development of Covid-19 vaccines that can bring the pandemic under control.
“I think getting moderate Senate Democrats on board for H.R. 3 is going to be a challenge, and I think there’s a lot of salient points attacking that policy around cures and the investments in the Covid vaccines, which have been shown to be effective,” said one health care lobbyist who’s been closely tracking Capitol Hill talks.
President Joe Biden, who campaigned on drug pricing negotiations, hasn’t said yet whether the House’s negotiation measure should be included in the infrastructure package. An administration official pointed to the Biden campaign’s plan, which also called for limits on drugs’ launch prices and prices hikes.
House Democrats approved their negotiation bill in the previous Congress, but it never came up for a vote in the Senate, which at the time was controlled by Republicans. Senate Democrats haven’t indicated whether they support including the negotiation measure in the infrastructure package, but it would come with attractive savings: $456 billion over a decade, according to the Congressional Budget Office.
Democratic leaders aren’t yet saying much publicly about their strategy for drug pricing, which aides and lobbyists said were in early phases. A senior Democratic aide in a statement called negotiations a “top priority” for this Congress.
Drugmakers are also holding their fire. Brian Newell, spokesperson for drug lobbying giant PhRMA, said the group is “ready to work with policymakers” to lower what patients pay out of pocket for drugs and “protect access to medicines and preserve future innovation” — nodding to industry arguments that government negotiations would result in drugs being withheld from patients and shrunken investments in research and development.
Privately, some drug industry lobbyists said they hoped to nudge Democrats toward focusing on a separate — and narrower — drug pricing effort that came out of the Senate Finance Committee with some bipartisan support last Congress. The bill, from Chair Ron Wyden (D-Ore.) and then-Chair Chuck Grassley (R-Iowa), doesn’t authorize negotiations but aims to curb drug price hikes in Medicare and caps seniors’ out-of-pocket spending, as the House version would.
It’s not that the industry likes the measure — and many Republicans have compared its central provision targeting price increases to “price controls” that are anathema to conservative orthodoxy. But it would mean a significantly smaller dent to industry profits. The Medicare restrictions on price hikes would save the federal government about $50 billion, just a fraction of savings from the House’s negotiation bill.
Democratic leaders meanwhile will face pressure from the party’s progressive wing, who will push for the infrastructure bill to include their priorities after the $15 minimum wage was dropped from the recent stimulus package. Rep. Pramila Jayapal (D-Wash.), chair of the Congressional Progressive Caucus, has said any drug pricing legislation should be more aggressive than H.R. 3, which didn’t extend the price hike protections to private health insurance.
“The ultimate goal is that no American should pay more for their drugs than anyone else in any other country,” Jayapal said last month.
Progressives could find new support from major employer groups that have historically been wary of price controls but are increasingly fed up with shouldering high health care costs. One of those groups, the Purchaser Business Group on Health, which represents large companies including Walmart and Boeing, said it’s in discussions to support a negotiation bill if it includes limits on price hikes for private health plans.
“We’re ready to play ball, and I think that having big employers on board could do a lot for Democrats on pushing back on the narrative the pharmaceutical industry is going to push is that this is bad for the economy and bad for business,” said Shawn Gremminger, the group’s director of health policy. “We think we could have a substantial role to play here.”
Wyden last week told reporters the House bill and his own are Democrats’ starting point for drug pricing legislation in this Congress. While he called the House measure’s negotiation provision “urgent business,” Wyden’s legislation is seen as more acceptable to Democratic moderates wary of negotiations.
In a Senate split 50-50, the threat of a single defection from a Democratic moderate could force the party to narrow its drug pricing ambitions.
Drug lobbyists sees a potential ally in Democratic Sen. Kyrsten Sinema, the Arizona moderate who has shown a willingness to break with her party. She tallied $121,000 in campaign donations from drugmakers and pharmaceutical lobbying groups during the 2020 election cycle, more than double what she received the previous two-year cycle when she was on the ballot, according to an analysis by Kaiser Health News. Her office did not return a request for comment.
Sen. Joe Manchin (D-W.Va.), who’s emerged as a power broker for moderates, has co-sponsored legislation that would allow Medicare to negotiate prices. However, he hasn’t indicated whether he would support including drug price negotiations in the infrastructure package.