Drug Costs Central Issue in Budget Battles

As Congress struggles to reach agreement on major legislation to fund leading administration social and spending initiatives and to raise the debt limit to avoid default on government borrowing, the White House is emphasizing that reduced spending on prescription drugs can help offset some of the steep costs. President Joe Biden highlighted how current proposals for curbing outlays on pharmaceuticals will help protect patients’ health and save the government billions in a speech December 6, 2021 on strategies for controlling drug costs.¹

Even though Biden applauded the efforts by pharmaceutical companies in developing life-saving vaccines and treatments for fight COVID-19, he criticized industry for jacking up prices on medicines that have been on the market for years. This leaves Americans paying “the highest prescription drug prices of any developed nation in the world,” he stated, lamenting that many patients struggle to afford needed therapies as a result.

Biden pointed to provisions in the Build Back Better (BBB) bill, which is pending before the Senate, that would change the equation. To help all consumers afford medicines, the legislation would set a $35-a-month cap on cost-sharing for insulin for all patients, impose a stiff tax on manufacturers that raise prices faster than inflation, and expand access to health insurance and Medicaid.

And to reduce Medicare drug expenditures, the legislation would open the door to government negotiation of prices on certain older drugs, while also capping annual outlays for seniors at $2000 a year. These provisions were approved by the House following lengthy negotiations with moderates anxious to protect incentives for biopharmaceutical R&D. One result is that the current measure limits Medicare price negotiations to only 20 drugs that have been on the market enough years to have lost exclusivity.

Even so, there’s strong opposition to the drug pricing proposals from Republicans, and the provisions may need to be revised and narrowed to avoid violating Senate budget rules that limit the type of legislative changes eligible for consideration in spending bills. At the same time, a calculation by the Congressional Budget Office (CBO) that the drug pricing provisions would save the government about $160 billion over ten years has built support for the package from Senate moderates who object to excessive federal spending. Senate majority leader Charles Schumer (D-NY) has set a goal of enacting the $1.7–$2 trillion BBB social-spending and climate change legislation by Christmas, but there’s a lot of skepticism on Capitol Hill about meeting that time frame. A more immediate deadline is for Congress to authorize an increase in the federal debt ceiling before it expires next week, a situation that continues to muddy the broader negotiations on spending and revenues.

Note

1. https://www.whitehouse.gov/briefing-room/speeches-remarks/2021/12/06/remarks-by-president-biden-on-prescription-drug-costs/