Ask the Advisor: July 2021

What Happened to Legislation to Cut Prescription Drug Costs?

Q:  What is the status of legislation to lower prescription drug costs?  I thought this Congress had made cutting the cost of prescription drugs a priority.

 A:  Many members of Congress ran on the issue of reducing prescription drug costs — a key priority, especially with older voters.  According to TSCL’s most recent Senior Survey, 88% of respondents think Medicare should negotiate drug prices by tying U.S. drug prices to those paid in other industrialized countries where prices are lower.

High drug prices are a retirement budget burden.  TSCL’s survey found that 28.5% of respondents, those with the highest out-of-pocket spending on prescription drugs, report spending at least $1,140 per year.  Of that group, 5% report spending at least $5,676 per year just on prescription drugs alone.

But despite the clear need to restrain drug costs, there’s no clear path to enactment.  Prescription drug legislation that authorized Medicare to negotiate drug prices passed the House in 2019, only to stall when the Senate took no vote on the bill.  This occurred even though the Congressional Budget Office has estimated that the House bill would save the federal government about $465 billion in drug spending over a decade.  That legislation, H.R. 3, the Elijah E. Cummings Lower Drug Costs Now Act, was recently reintroduced in the House.  But in the Senate, Democrats do not have enough votes without Republican support for the legislation to pass.                   

 H.R. 3 would allow Medicare to:

  • Use an average lower price that is used in other economically developed countries.
  • Apply tax penalties to drug manufacturers who don’t comply with negotiation.
  • Cap price increases to no more than the rate of inflation. Drug makers who hike prices above that rate would owe rebates to Medicare.

Eighty three percent of respondents to a TSCL Senior Survey in 2020 overwhelmingly support restricting drug price increases to no more than the rate of inflation.

Republican Senator Chuck Grassley of Iowa is urging a more bipartisan approach than H.R. 3.  Senator Grassley opposes allowing Medicare to negotiate drug prices, but supports requiring drug makers to pay rebates for price hikes above the inflation rate — a potential compromise.