Frequently Asked Questions: Drug Pricing, H.R. 3 and Rep. Peters’ Reduced Costs and Continued Cures Act
As negotiations continue to determine the final version of the Build Back Better Act, many individuals are contacting my offices in San Diego and Washington, D.C. to ask about particular tenets of the reconciliation package, specifically drug pricing reforms.
My staff consolidated the list below of frequently asked questions as a handy resource for my constituents to learn more about this important topic.
Q: What is H.R. 3, the Lower Drug Costs Now Act? What does it do?
A: The Elijah E. Cummings Lower Drug Costs Now Act establishes programs and requirements relating to the prices of prescription drugs, health care coverage and costs, and public health.
H.R. 3 includes three main mechanisms to lower drug costs:
First, the bill enables the Secretary of Health and Human Services (HHS) to negotiate the price that Medicare pays for at least 25 of the highest-cost drugs without at least two competitors on the market each year. The bill establishes an international reference price to inform the Secretary’s negotiation, and caps the price paid by the federal government for a drug at 120% of the average price paid by Australia, the United Kingdom, Japan, Canada, Germany, and France. For drugs that are new to the market or which are not available in those other countries, the Secretary would have authority to negotiate a 15% discount on the list price. If a drug manufacturer refuses to negotiate the price of a drug with the Secretary, the Secretary is authorized to institute an excise tax of 95% of revenue from the non-negotiated drug.
Second, the bill establishes an inflationary rebate program in Medicare Parts B and D that would tie annual price increases for either branded or generic drugs (including biologics and biosimilars) to inflation. If a manufacturer increases prices in a given year above the rate of inflation, the federal government requires the manufacturer to rebate the difference between the price increase and the rate of inflation to the federal government.
Finally, the bill reimagines the cost-sharing structure for the Medicare Part D benefit. In doing so, Part D enrollees would spend a maximum of $2,000 out of pocket on drugs each year, and plan providers and drug manufacturers would cover more of the costs above $2,000 than they currently do.
Q: Why did Rep. Peters vote against this legislation to lower drug costs?
A: In mid-September, the House Energy and Commerce Committee considered 16 individual elements of President Joe Biden’s $3.5 trillion Build Back Better agenda. Rep. Peters supported 15 of the provisions and opposed one: the proposed drug pricing reform plan known as H.R.3, which the Congressional Budget Office and other analysts believe will stifle investment in medical research and reduce drug discovery.
H.R. 3 passed the House in 2019 and again in 2020 - both times died in the Senate. Thus, it has not lowered the price of one single prescription drug. Enough senators signaled that it was destined for failure again this time in reconciliation, and Rep. Peters was not willing to watch history repeat itself. Millions of Americans are struggling to pay for their medicines at the pharmacy counter, and we need a plan to succeed now.
Rep. Peters is dedicated to solving problems, which is why he offered alternative legislation that would lower prescription drug costs for seniors and other consumers without hindering the development of new cures: the Reduced Costs and Continued Cures Act (RCCCA.)
Q: How is the Reduced Costs and Continued Cures Act (RCCCA) different from H.R. 3?
A: First, the RCCCA prioritizes lowering drug costs for low-income seniors who need our help the most by establishing a need-based cap on their out-of-pocket drug costs:
$1200 annual out-of-pocket cap for those at 300 percent or less of the Federal Poverty Level;
$1800 annual out-of-pocket cap for those at 300 to 400 percent of the Federal Poverty Level; and
$3100 annual out-of-pocket cap for those at above 400 percent of the Federal Poverty Level.
This lowers drug costs for seniors more than H.R. 3, and provides the greatest support for those who need it most.
Second, the RCCCA does not stifle the billions of dollars in venture capital investment required to bring life-saving and life-changing drugs and treatments to market. Accounting for failures, developing one new drug costs a company $1 billion to $2 billion. Research!America found that private investment topped $100 billion in 2018; this investment dwarfs what the federal government is able to do with the portion of the current National Institutes for Health budget of $41 billion that is dedicated to basic research. Sick and dying patients depend on modern medicine to save their lives, which is why Rep. Peters’ proposal cuts drug costs at the pharmacy counter without sacrificing the cutting-edge research that produces the cures of the future.
Third, the RCCCA lowers drug prices for all consumers, not just seniors, by ending the loopholes drug manufacturers use to delay generic drugs from coming to market. It also sets a $50-per-month cap on what diabetes patients pay for insulin. It creates a penalty for drug price increases that exceed the rate of inflation, keeping costs down. And it allows Medicare to negotiate for the most expensive drugs to cut those prices by as much as 35%.
Fourth, the RCCCA is estimated to save the federal government approximately $200 billion over 10 years by reducing the costs for drugs paid by Medicare. This results in tremendous savings that could be used to extend the life of this critical safety net program. We believe that HR3 --without any price negotiation at all -- would return about $350 billion in savings to the federal government. If we reduced the relief to consumers in RCCCA to match HR3 and added the tailored negotiations proposed in the RCCCA, the savings number could approach $400 billion. Rep. Peters’ bill provides substantial savings, with room for more, without disincentivizing the investment of risk capital in the private sector that is so critical to generating cures to the most devastating diseases.
Finally, the RCCCA dramatically increases transparency in the drug pricing labyrinth. The corporate middlemen who go between the drug manufacturers and the pharmacies and other drug purchases would be required to report the true costs they pay for prescription drugs to ensure those costs aren’t jacked up along the way to the consumer. It also requires transparency from drug manufacturers to explain why they increase drug prices from one year to the next. They also must explain why a particular drug has an unusually high price when it is launched so doctors and consumers can decide for themselves if the cost is worth what they must pay.
Q: Who pays for this proposal? How is it funded?
A: This saves the federal government approximately $200 billion over 10 years by setting an inflation cap so we can’t raise the cost of drugs beyond the cost of inflation. Rep. Peters’ bill would use excess profits from pharma dating back to 2016 to pay for these benefits for seniors; generating at least $200B more than we can invest in other healthcare priorities.
Q: How much money does RCCCA generate or save the federal government?
A: On top of the $200 billion in savings to the federal government, this plan also protects the billions of dollars in private investment spent to discover new cures to diseases, money the federal government would either have to pull from other priorities to maintain aggressive drug discovery, or money that would go away and halt the discoveries the sickest patients are waiting for and counting on to keep them alive.
Q: Why do patient advocacy groups support RCCCA and oppose H.R. 3?
A: The primary objective of patient advocacy groups is to find cures to the most debilitating and deadly diseases: cancer, ALS (Lou Gehrig’s disease), HIV & Hepatitis, Alzheimer’s, and others. They also believe that H.R. 3 threatens to dramatically decrease the investment of risk capital required to bring new drugs and treatments to patients. Particularly, they fear much-needed advancements in oncology, rare diseases and non-narcotic pain treatments could be drastically delayed or stalled altogether.
According to a 2019 Congressional Budget Office (CBO) report, the 2019 version of H.R. 3, had it become law, would have resulted in a 10% decrease in the number of new drug discoveries or 38 fewer new drugs, over a period of 20 years. A 2020 CBO report found that H.R. 3 would result in 58 few new drug discoveries over 30 years. Other studies found that in just 10 years patients could lose out on as many as 61 new drugs and treatments.
Q: Is the CBO overstating the disinvestment in research and development?
A: The CBO is an independent, nonpartisan body that predicts disinvestment in new cures in three different reports analyzing the outcomes of H.R. 3. The base of Rep. Peters’ proposal is rooted in the facts from this research. We cannot risk the work of 68,000 people in his district nor the future of those who hold out hope for new cures. The CBO predicted a range of disinvestment; that means it could be lower, or it could also be much higher.
Q: Why is Rep. Peters blocking the Reconciliation package which includes President Biden’s Build Back Better agenda?
A: Rep. Peters looks forward to seeing the President and his agenda succeed. His concerns about H.R. 3 and vote against passing it through the Budget Committee did not block the entirety of the reconciliation package. As Rep. Peters explained in his remarks, he strongly felt that Americans needed more answers on this legislation before committing to spending $3.5T. Numerous members of Congress have also expressed a desire to spend more time to finalize this proposal.
Q: Why did Rep. Peters support H.R. 3 before, but now, when Democrats have the power and majority to pass once in a lifetime legislation, he decides to vote against it?
A: Back in 2019, Rep. Peters voiced his concerns about the potential consequences of H.R. 3. He voted to pass it in hopes that it could spur bipartisan cooperation on how to lower the cost of prescription drugs while maintaining our innovation ecosystem. Unfortunately, those conversations did not take place and the bill failed to pass in the Senate.
In May of this year he asked Congressional leaders to work together to achieve bipartisan drug pricing reform. When Speaker Nancy Pelosi announced the House of Representatives would vote on the very same bill once again in the 117th Congress, Rep. Peters developed a policy plan to accomplish the goal of lowering drug prices for low-income Americans.
Rep. Peters knew it was time to provide an alternative that stood a chance to pass and make a difference for millions of Americans. He is encouraged by the fact that these conversations are now happening to come to an agreement.
Q: Where can I find more info if I want to do my own research on RCCCA?
A: Here are some helpful links that explain RCCCA and how the legislation differs from H.R. 3: