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CBO says Nancy Pelosi’s drug pricing plan saves Medicare $345 billion over a decade

Speaker of the House Nancy Pelosi speaks at the Atlantic Festival in Washington, September 24, 2019.

Kevin Lamarque | Reuters

House Speaker Nancy Pelosi‘s bill to lower prescription drug prices would save Medicare $345 billion over 10 years, according to a preliminary analysis from the nonpartisan Congressional Budget Office.

The savings wouldn’t begin until 2023, assuming the bill gets passed by both the House and Senate and signed by President Donald Trump before the end of this year, the CBO said in the report released late Friday. The greatest savings would come in 2028 at $93 billion, according to the CBO, an independent agency that reviews congressional spending.

The CBO said the largest savings would come from the provision that allows Medicare to negotiate lower prices on as many as 250 of the most expensive drugs per year and apply those discounts to private health plans across the U.S. The legislation includes a penalty on pharmaceutical companies that refuse to negotiate or fail to reach an agreement with the U.S. government, starting at 65% of the gross sales of the drug in question.

The lower prices under the legislation would immediately lower current and expected future revenues for pharmaceutical companies, according to the CBO. The plan would also alter drug manufacturers’ incentives and have broad effects on the drug market, the CBO said.

“A manufacturer that was dissatisfied with a negotiation could pull a drug out of the U.S. market entirely, though CBO expects that would be unlikely for drugs already being sold in the United States,” CBO Director Phillip Swagel said in the report.

Current rules prohibit the Department of Health and Human Services from negotiating drug prices on behalf of Medicare — the federal government’s health insurance plan for the elderly. Private insurers use pharmacy benefit managers to negotiate drug rebates from pharmaceutical manufacturers in exchange for better coverage.

Pelosi and other House Democratic leaders had been working on the plan for months. The legislation is expected to move through House committees to a vote on the floor as soon as the end of this month.

Senate Finance Committee Chairman Chuck Grassley, R-Iowa, who is currently rallying support for a Senate drug pricing bill backed by Trump, praised Pelosi’s CBO score but noted that any bill that passes would likely need to be bipartisan.

“The legislation I authored with Ranking Member [Ron] Wyden [D-Ore.] strikes that balance and would achieve real progress for Americans,” Grassley said. “To date, it’s the only significant, bipartisan legislation to lower prescription drug prices that’s passed a congressional committee.”

He continued: “I urge my colleagues in the House and the Senate to get to work to lower costs while ensuring life-saving treatments can continue to be developed right here in America.”

High prescription drug costs have become a rare bipartisan issue, with lawmakers on both sides of the aisle demanding changes. Congress and the Trump administration are trying to pass legislation before the end of the year that would bring more transparency to health-care costs and, ultimately, lower costs for consumers.

Trump, who is seeking re-election, signed an executive order earlier this month that he said would improve private Medicare plans for seniors.

The order is intended to bolster Medicare Advantage, which is private Medicare insurance for seniors. It’s also intended to offer more affordable plan options, encourage wider use of telehealth services and promote wellness benefits, among other provisions.

The White House did not immediately respond to a request for comment on the CBO score.

Last month, Pelosi said she hoped to work with Trump on a bill to lower drug prices even after launching a formal impeachment inquiry the day before.

In response, Trump accused Pelosi of trying to distract voters from the Democratic impeachment inquiry.