November 19, 2018

Medicare Prescription Drug Negotiations Legislation

Representative Lloyd Doggett (D-TX) introduced the Medicare Negotiation and Competitive Licensing Act, H.R. 6505 on July 25, 2018. This legislation will require the Secretary of Health and Human Services to negotiate drug prices directly with pharmaceutical corporations, the way the government does now for Medicaid, the Defense Department and the Veterans Administration (VA). If negotiations fail, the government is authorized to license patents in order to foster generic competition.

Drug prices under Medicare Part D have continued to rise and are projected to increase annually by 4.7 percent between 2016 and 2026. This increase will not only affect federal drug spending, but also beneficiaries’ out-of-pocket costs.

Key provisions include:

    • Negotiations – Current law explicitly prohibits the Secretary of Health and Human Services from negotiating with pharmaceutical companies on behalf of Medicare, which provides insurance for more than 58 million Americans. This legislation will change that.
    • Provide Competition – If a drug manufacturer refused to offer a reasonable price, H.R. 6505 gives the Secretary the tools to bring them back to the negotiating table. The Secretary, taking into consideration factors such as financial burden on patients and the drug’s effectiveness, can license patents or other exclusivities related to the drug so that qualified generics can enter the market and compete. This is a fallback position intended only when negotiations fail.
    • Originator’s Innovation Protected – Under a competitive license, the patent holder would be paid a royalty rate based on research and development costs and the health benefits derived from the drug.
    • Savings – Medicare Part D pays on average 73% more than Medicaid and 80% more than the VA for brand-name drugs. Medicare could save taxpayers and consumers $16 billion a year if it secured VA prices.


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