Congressman Lloyd Doggett of Texas, along with 59 other House Democrats, just introduced a bill that would require Medicare drug price negotiation. Doggett’s bill provides the Secretary of HHS with the countervailing power needed to keep Pharma from gouging people with Medicare. And, if Pharma refuses to sell a prescription drug at a fair price, the bill protects patient access to the drugs, by requiring compulsory licensing.
Doggett’s bill represents the first big Congressional initiative to rein in drug prices. It strikes the “noninterference clause” from the law that enacted Medicare Part D prescription drug coverage. This clause prevents HHS from negotiating Part D drug prices at the moment. Rather, Doggett’s bill requires the Secretary of HHS to negotiate drug prices. And, it ensures that Pharma cannot keep drugs off the market if it does not like the price HHS is willing to pay.
According to Steve Knievel of Public Citizen, “What makes this bill unique relative to other Medicare Part D price negotiation bills is that it includes a novel fallback mechanism to allow for competition when negotiations with a drug manufacturer fail to arrive at an appropriate price. It puts the drug company’s patent monopoly at risk.”
In brief, if Pharma and HHS cannot agree on an appropriate price for a drug, the Secretary of HHS would be obligated to issue a “competitive license” to a generic drugmaker, resulting in generic competition of the drug. HHS would license the use of the patent, clinical trial data and any other rights needed by a generic drugmaker to make the drug. Whether a drug price is appropriate would be based, among other things, on comparative effectiveness research, the cost of covering the drug, the burden on patients who need the drug.
The prescription drug’s patent holder would receive a royalty, which would be calculated based on a variety of factors, including the cost of research and development of the drug and the drug’s benefits.
Public Citizen believes that this bill gives the Secretary of HHS the needed leverage to negotiate a reasonable drug price, eviscerating a drugmaker’s patent monopoly, where appropriate, and protecting patients. And, recognizing that it may take a little time for the generic drugmaker to produce the drug, during that period, the Secretary is authorized to set the price of the drug at the international reference price, its average price in other wealthy countries.
If the pharmaceutical company will not sell the drug to people with Medicare at the average price it sells it to the Germans, the Japanese and other wealthy countries, the generic drugmaker would have a license to sell the drug to all federal programs, not only Medicare Part D.
This bill is a huge step forward, though it only covers the 18 percent of people in the US with Medicare. Ideally, it would offer prescription drug price protection to everyone in the US. It could do so easily if it also gave everyone in the US Medicare exclusively for the purpose of benefiting from HHS’ negotiated prices. Without that benefit, it goes without saying that Pharma will attempt to use its monopoly pricing power to raise prescription drug prices for everyone who does not have Medicare. And, that will penalize people not yet on Medicare as well as the businesses that provide them health insurance.
To ensure access to critical medications for everyone, prescription drug innovation should not be linked to drug prices. Jamie Love at Knowledge Ecology International (KEI), an international expert on drug pricing, explains that “The Democrats also need to understand and endorse the progressive delinking of R&D incentives from drug prices, so that access and innovation are not at odds with each other.”
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