H.R. 1046: Act Now to Bring Drug Prices Down

Prescription drug prices are substantially higher in the United States than in other high-income countries, and as a result Americans spend more on prescription drugs than residents of other countries. Despite this, the government is not allowed to use its position as the largest purchaser of prescription drugs in the world (through Medicare Part D) to bargain for lower prices for patients. House Democrats have pledged to work on lowering prescription drug prices now that they are in the majority, including by allowing Medicare to negotiate prices, but it isn’t yet clear which bill they will bring to the floor to accomplish this.

Rep. Lloyd Doggett (D-TX) has introduced the Medicare Negotiation and Competitive Licensing Act (H.R. 1046) to give Medicare the power it needs to effectively negotiate with drug companies and bring drug prices down. Call your Representative (MoC) and tell them: reject bills that would use arbitration to bring down drug prices, and co-sponsor H.R. 1046, the Medicare Negotiation and Competitive Licensing Act!

In this resource, we’ll tell you more about how H.R. 1046 will bring drug prices down, explain why alternative proposals fall short, and provide you with the tools you need to tell your MoC to become a co-sponsor.

What would the bill do?

Almost 9 in 10 Americans support making it easier for generic drugs to come to market, and a similar number support allowing the government to negotiate with drug companies to get a lower prescription drug price for people with Medicare. Rep. Doggett’s bill lifts the restrictions that currently prevent Medicare from negotiating with drug companies, but just as importantly it would give Medicare the leverage it needs to negotiate effectively without putting patients at risk.

Here’s how it would work:

• Under H.R. 1046, the Secretary of Health and Human Services would be required to negotiate prices for covered Medicare Part D drugs (which is most drugs). This would help to bring down spending on prescription drugs by tens of billions of dollars, since Medicare Part D has a tremendous amount of purchasing power.

• If the negotiations don’t arrive at an appropriate price, the Secretary would be required to issue a “competitive license.” A competitive license means generic producers of drugs would be allowed to manufacture competitors to name brand drugs when the drug company that owns the patent refuses to responsibly negotiate with Medicare. This competition would subsequently bring down the price of the drug for patients.

• This approach would put drug companies’ monopolies in the crosshairs—not people's access to medicine. Whether companies are willing to negotiate their prices down or have to deal with generic competition, patients will come out paying lower prices.

What about innovation?

Drug companies like to argue that introducing competitive licensing would hurt their bottom line or reduce innovation, but that just isn’t true. H.R. 1046 includes a provision that ensures they receive reasonable compensation in the event that a license is issued for one of their drugs, meaning their investment won’t be completely lost—just their ability to exploit it to extract maximum profit from the patients who take their medicine.

It also bears mentioning that public funding plays a major role in the research and development of new drugs. Of the 210 drugs approved by the FDA from 2010-2016, every single one was associated with NIH-funded research. If taxpayers are helping to fund the research that drug companies use to generate new products, drug companies should not be able to turn around and gouge those same people with high prices once the drugs reach the market.

Finally, while Big Pharma does spend a lot on research and development, these companies spend even more than that on advertising (often targeted directly at health care professionals), and on stock buybacks to enrich their shareholders. Between the time the GOP Tax Scam passed in December 2017 and January 2019, drug companies announced nearly $73 billion in buybacks. Drug companies that are prioritizing growing their market (which can have destructive effects, as we’ve seen with the opioid crisis) and enriching their executives over affordability shouldn’t be taken seriously when they complain about being pushed to make their drugs more affordable for the people who need them.

Why isn't arbitration good enough?

News reports have suggested that House Democratic leadership is working on an alternative proposal to H.R. 1046 that would use binding arbitration as the “backstop” to bring down drug prices if negotiations break down between Medicare Part D and drug companies, instead of competitive licenses.

Let’s be clear: House Democrats promised that they would use the House majority to “[allow] Medicare Part D to negotiate drug prices,” and arbitration falls short of that standard. There are a few key problems with arbitration as a solution:

• It puts public power in the hands of an unaccountable decision maker. Medicare Part D is a public program, and the decision of how much is appropriate to pay drug companies for their medicines should lie with public officials—not an unaccountable arbiter.
• It would only apply to some drugs, not everything covered by Part D. Arbitration is time-consuming and imposes a substantial administrative burden, which means that it would necessarily be a slow process that could only work on a few drugs at a time. In addition, reports suggest that under this proposal Medicare would only be required to negotiate the price of as few as 25 drugs every year—further limiting its ability to bring prices down across the board.
• It could lead to non-coverage of drugs. The major advantage of H.R. 1046 is that, with competitive licenses as the “backstop” to negotiations, patients are protected from losing access to the medicines they need. In contrast, under an arbitration system, a drug company might refuse to sell their drug at the price set by the arbiter—thus putting patient access at risk.

Medicare negotiation and competitive licenses are supported by huge majorities of people in red, blue, and purple districts, and would effectively bring down drug prices. Democrats don’t need to undermine their own legislative promises by backpedaling and settling for arbitration, especially when it means that millions of people would end up worse off for it.

Call your MoC now and tell them to co-sponsor H.R. 1046, the Medicare Negotiation and Competitive Licensing Act!