House approves provision to permit some drug negotiation by Medicare

Democrats are one step closer to a long-sought policy goal: allowing Medicare, the federal health insurance program for Americans over 65, to negotiate prices with drugmakers. 

The idea has been to leverage the government's market power to get better deals on pharmaceuticals and pass along the savings to Medicare beneficiaries, something currently forbidden under the law.

"Biden will repeal the existing law explicitly barring Medicare from negotiating lower prices with drug corporations," Biden said as a candidate.

Biden's social spending and safety net legislation, the Build Back Better bill, passed the House on Nov. 19. After months of negotiation, the version that passed the chamber kept language addressing Medicare price negotiation, although it isn't blanket permission to negotiate on price for all drugs.

The bill would permit price negotiation over a small number of high-cost drugs covered under Medicare Part D, starting in 2025, and Medicare Part B, starting in 2027, according to an analysis by the Kaiser Family Foundation. (Medicare Part D covers prescription drugs, while Medicare Part B covers out-of-hospital patient treatment.)

Under the bill, the number of single-source drugs subject to negotiation would start at 10 in 2025, rise to 15 in 2026 and 2027, and finally reach 20 in 2028 and beyond.

These drugs would be selected from among the 50 drugs with the highest spending in each of the two Medicare categories, and would apply to insulin as well.

Separately, the Build Back Better bill includes other provisions that could reduce Medicare drug costs, including limits on annual drug price increases, a cap on out-of-pocket spending for Medicare Part D beneficiaries; limits on cost sharing for insulin; and an end to cost-sharing for covered adult vaccines.

With House passage of the bill, it moved to the Senate, where Democratic leaders have said they hope to vote on it before Christmas 2021. That timeline could slip, and even if it passes the Senate, it might undergo changes that would need to be approved by the House. 

Given the lengthy, bicameral negotiations that preceded House passage, the bill's ultimate enactment is no certainty. Still, House passage is a major step forward, so we rate this In the Works.