The Biden administration released its plan for lowering prescription drug costs, including government-led drug price negotiations for Medicare, and passing the costs to employer plans as well as several administrative actions to complement any legislation passed in Congress.
The plan focuses on three principles for drug price reform:
- Make drugs more affordable for all consumers and throughout the entire health care system, not just in Medicare;
- Improve and promote competition in the pharmaceutical industry by promoting biosimilars and generics and increasing transparency; and
- Foster scientific innovation through public and private research to promote the discovery and accessibility of new treatments.
The plan outlines the types of legislative policies the administration would support if Congress pursued them:
- Making negotiated drug prices available to employer and commercial plans.
- Capping out-of-pocket spending in Medicare Part D.
- Slowing price increases on existing drugs.
- Prohibiting anti-competitive practices like pay-for delay agreements which incentivize generic competitors to limit marketing of generic alternatives.
- Creating a new agency within the National Institutes of Health to promote medical innovation through significant funding.
The plan also includes several administrative measures such as:
- Increasing transparency by collecting information from insurers and Pharmacy Benefit Managers (PBMs) on drug prices, rebates, and out-of-pocket spending on prescription drugs.
- Tying reimbursement for drugs in Medicare plans to the drugs' clinical value.
Outlook: The Biden administration’s plan threads the needle between the asks of progressive Democrats for government price negotiation and the concerns of GOP and moderate members over the impact on innovation and market competition. Released amid the reconciliation process, it signals the Biden administration’s intention to back legislation in Congress and to further empower the federal government to drive down costs.
