Democrats have reached an agreement on a package of measures to reduce drug prices that would result in the US government negotiating directly with pharmaceutical companies over pricing for the first time.
Chuck Schumer, the Senate majority leader, announced on Tuesday that he and his colleagues had agreed to a range of measures designed to curb the US’s high drug costs and bring them more in line with those of other developed countries.
The proposals, which mark a step forward in lawmakers’ wrangling over the final contents of Joe Biden’s $1.75tn spending bill, include allowing the government to negotiate over some of the drugs bought under the publicly run Medicare insurance programme. They also place caps on how much patients can spend in a year on treatments for which they are not covered.
Schumer said: “[This deal] will reform the entire industry to stop price gouging and change both drug company and health insurance incentives to make sure our country’s drug pricing system benefits patients, not corporations.”
Patients in the US pay around three times as much for drugs as those in Europe, according to research by the Brookings Institution, helping the US to account for about three-quarters of global pharmaceutical company profits.
The public has long supported moves to allow the government to negotiate some drug prices. A poll last month by the Kaiser Family Foundation think-tank found that 83 per cent of Americans are in favour of such a proposal, including 71 per cent of Republicans.
Nevertheless, many Democrats were disappointed last week when the White House released a draft of the bill that entirely omitted many of the US president’s campaign pledges to reduce the cost of medicines.
The removal of the curbs appeared to be a victory for the US pharma industry’s powerful lobby, but senior Democrats continued negotiating throughout the weekend to get them written back in.
A spokesperson for Kyrsten Sinema confirmed that the Democratic senator from Arizona, who had been one of the last holdouts against such proposals, confirmed on Tuesday she also backed the measures.
Schumer said the new drug-pricing proposals would mean Medicare patients do not have to pay more than $2,000 a year for medicines they cannot claim on insurance. They will reduce the price of an insulin injection from $600 to $35, and they will allow the government to negotiate over drugs in both Parts B and Part D of Medicare plans — both those administered by a doctor and those taken at home.
The senator did not say which drugs exactly the government will be able to bargain over. However a draft version of the text circulating among Democrats said the US health secretary would choose an initial 12 drugs from a list of the most expensive ones which have outlasted their regulatory exclusivity period, during which they cannot be challenged by cheaper generics. That list would rise to 30 drugs by 2028.
The agreement would also include a version of the inflation-linked price cap, which would force drug companies to repay the government if the price of a drug rises above inflation. But the impact of this measure would be limited by calculating the cap based on 2020 or 2021 prices, rather than the price in 2016, as proposed by some Democrats in Congress.
The proposals had been fought heavily by US drug companies, which spend more on lobbying in Washington each year than any other industry. Trade groups had warned that a more radical version of the Democrats’ proposals would cut industry revenues by 40 per cent and have a chilling effect on the research and development of new drugs.
Schumer said: “Many of us would have wanted to go much further, but it’s a big step in helping the American people deal with the price of drugs.”
The proposals come as Democratic lawmakers also appeared to near a deal on the so-called “Salt” cap on federal tax deductions for state and local taxes on Tuesday, in a win for House moderates from wealthier states who have long railed against the policy.
Donald Trump’s 2017 tax reforms limited the amount households could deduct in state and local property taxes from their federal income tax at $10,000, in a move that hit homeowners in states with high state and local property taxes, like New York, New Jersey and California. On Tuesday, lawmakers seemed to be nearing a deal to scrap the cap for five years.