The Senate is set to take historic action to curb runaway costs for prescription drugs

For the first time ever, the U.S. is on the verge of curbing some drug pricing practices that have sparked widespread public anger and generated support for Congressional action.  Recent polling by the Kaiser Family Foundation found that 88% of adults favor limiting price hikes for prescription drugs, and 85% support limiting out-of- pocket drug costs for people on Medicare. A bill expected to pass the Senate next week would be the proverbial game changer, offering Medicare beneficiaries some much needed pocketbook relief. 

“We are thrilled with the legislation,” said David Mitchell, founder of Patients for Affordable Drugs Now. “Is the bill everything we could hope for if we could write the legislation ourselves? No. But that’s not the way things work here.” Mitchell said the bill’s “historic changes are going to alter the trajectory of drug price policy and prices for years to come.” 

The bill would begin to undo fallout from the 2003 Medicare Modernization Act. Recall that law, which gave Medicare beneficiaries their prescription drug benefit, also prohibited the agency from negotiating prices. In effect, for agreeing to a Medicare drug benefit for seniors, pharmaceutical companies were free to continue charging consumers whatever they wished. As prices rose over the years and costly new drugs came to market, the public began to push back.

“People are getting mugged at the pharmacy counter,” Oregon Sen. Ron Wyden, chair of the Senate Finance Committee, said on a press call last week sponsored by STAT News. 

The proposed legislation begins to address the affordability of medications, at least for the 62 million Americans on Medicare, especially the nearly 50 million who have chosen to take Medicare’s Part D drug coverage. 

The bill has three major components:

First, Medicare would be allowed to negotiate prices beginning in 2026, initially for 10 expensive brand-name drugs that are bought at a pharmacy. The number would increase each year until the prices for as many as 60 drugs would be subject to negotiation in 2029. These would be drugs that have been on the market for several years and have no price competition. 

Xarelto, a blood thinner to treat and prevent blood clots, is the kind of drug that would be subject to negotiation. It came to market in 2011 with a price of $218 for one month’s supply. Today a monthly supply today costs $516, an increase of 136%.

More than 1 million people took the drug in 2020, when it was the third most costly drug for Medicare, according to Patients for Affordable Drugs Now. 

Newer and possibly more costly drugs would not be subject to negotiation for several years. The legislation aims to continue giving drug companies the freedom and incentive to innovate and find new cures. Prices for drugs made by small biotech companies, and drugs that have genuine competition also would not be eligible for negotiation. Some drugs, such as Humira, an immunosuppressive, and Latuda, an antipsychotic, would not be subject to negotiations because there is generic price competition. Mitchell says drug companies now are incentivized to block generic competition. “This legislation will disincentivize such abuses by allowing Medicare to negotiate down the price of brand-name drugs that have been on the market a long time and still lack market competition.”

Another provision of the bill would set a $2,000 limit on the amount that Medicare beneficiaries must pay out-of-pocket for Part D drugs, purchased at a pharmacy. Beneficiaries with cancer or autoimmune diseases now spend as much as $15,000 annually out-of-pocket on their medicines. This provision would not apply to Part B drugs, which are typically administered at a hospital or doctor’s office. .

The bill also would, for the first time, curb what many observers believe is price gouging. It would allow companies to raise drug prices no higher than the rate of inflation and calls for penalties for companies exceeding the limit. This provision is especially helpful to people who pay some or all of the full list price or a portion of their co-insurance.   

The current version of the bill does not cap insulin spending at $35 a month, an issue debated in earlier versions. Nor does it require negotiations over insulin prices. Separate legislation dealing with insulin prices, which can run as much as $300 a vial depending on someone’s use, has been introduced in Congress. 

Relief from high prices won’t be immediate. While some provisions would go into effect later this year, and Medicare beneficiaries who have Part D coverage would see an impact by the end of 2023, it will take years before the law is fully effective.

The bill is expected to pass through a process called reconciliation, which requires only a simple majority, 51 votes. The Democrats appear to have 50 votes in the Senate and a tie-breaker by Vice President Kamala Harris.

Meanwhile,, the drug industry is hard at work trying to scuttle the legislation’s provisions. A statement released by the Pharmaceutical Research and Manufacturers of America, also known as Big PhRMA, argued that Democrats had weakened cost protections “while doubling down on sweeping government price-setting policies that will threaten patient access and future innovations.” The Congressional Budget Office, however, found the bill would not have a major impact on the number of new drugs coming to market and estimated that the legislation would generate nearly $300 billion in savings over 10 years.

“The industry’s comments about innovation don’t hold water,” says Stacie Dusetzina, an associate professor of health policy at Vanderbilt and an expert on drug policy. “The bill protects innovation in the future and strikes a balance.”

Veteran health care journalist Trudy Lieberman is a contributing editor at the Center for Health Journalism Digital and a regular contributor to the Remaking Health Care column.