What You Need to Know about President Trump’s Drug Pricing Plan

On Friday, President Trump gave a Rose Garden speech outlining his plan, entitled “America’s Patients First,” to combat rising drug prices. The plan incorporates policy ideas included in the president’s budget earlier this year, new proposals, and additional topics for discussion that could turn into more specific ideas in the future.

What’s the Problem?

Surveys suggest public frustration with the cost of prescription drugs. While such costs represent a small fraction of overall spending on health care, several dynamics help the prescription drug issue gain disproportionate attention. First, in any given year, more Americans incur drug costs than hospital costs. Whereas only 7.3 percent of Americans had an inpatient hospitalization in 2013, more than three in five (60.7 percent) had prescription drug expenses.

With more Americans incurring drug costs, and paying a larger percentage of drug costs directly from their pockets, the issue has taken on greater prominence. The rise of coinsurance (i.e., paying a percentage of drug costs, rather than having those costs capped at a set dollar amount) for pricey specialty drugs exacerbates this dynamic.

What Are the Proposed Solutions?

In general, ways to address drug prices fall into three large buckets.

Controlling costs through competition: These solutions would involve bringing down price levels by encouraging generic competition, or substituting one type of drug for another.

Shifting costs: These solutions would alter who pays for drugs among insurers, pharmaceutical benefit managers (PBMs), or consumers. While they may make drugs more “affordable” for consumers, they will not change overall spending levels. In fact, if done poorly, these types of proposals could actually increase overall spending, by encouraging individuals to increase their consumption of costly brand-name drugs.

Drug company and PBM stocks went up Friday following the blueprint’s release, largely because the plan eschews actions in the second bucket. The president’s plan includes a few tweaks to the system of “rebates” (de facto price controls) the Medicaid program uses, but includes none of the major Democratic proposals to use blunt government action to drive down prices.

In fact, the plan criticizes foreign price controls, attacking the “global freeloading” by which other countries gain the research and development benefits of the pharmaceutical industry without paying their “fair share” of those R&D costs. While the plan frequently mentions the disproportionate share of costs American consumers pay, it includes few specific proposals to rebalance these costs to other countries. It also remains unclear whether, if successfully implemented, any such rebalancing would successfully lower prices in the United States.

Other competitive proposals include giving Medicare Part D plans more flexibility to adjust their formularies mid-year to respond to changes in the generic drug marketplace, and prohibiting Part D plans from including “gag clauses.” These clauses prohibit pharmacies from telling consumers that they would actually save money by paying cash for certain drugs, rather than using their insurance.

In the cost-shifting bucket lie several of the proposals incorporated into the president’s budget. For instance, a cap on out-of-pocket expenses for the Medicare Part D prescription drug benefit would provide important relief to seniors with very high annual drug costs. However, to the extent that such a proposal would encourage seniors to over-consume drugs, or purchase more costly brand-name drugs, once they reach such a cap, this proposal could also increase overall Part D spending.

In a similar vein lie proposals about PBMs passing drug rebates directly to consumers at the point of sale. In most cases, PBMs had previously passed on those savings indirectly to insurers in the form of lower premiums. Giving rebates directly to consumers—a practice some insurers have begun to adopt—would provide relief to those with high out-of-pocket costs, but could raise premiums overall, particularly for those with relatively low prescription spending.

What’s Next?

The plan raises more questions than it answers—quite literally. The last and longest section of the blueprint includes 136 separate questions about how the administration should structure and implement some of the proposals discussed in the document.

Some proposals, while eye-catching, seem ill-advised. For instance, the proposal to “evaluate the inclusion of list prices in direct-to-consumer advertising” raises potential First Amendment concerns—government dictating the content of drugmakers’ communications with patients. Moreover, with many Americans viewing health care as a superior good, some consumers may view a more expensive product as “better” than its alternative. In that case this proposal, if ever implemented, could have the opposite of its intended effect, encouraging people to consume more expensive drugs.

The plan did not include the heavy-handed approaches to the prescription drug issue—Medicare price “negotiation” and drug reimportation—that Democrats favor, and that President Trump endorsed in his 2016 campaign. The document also makes clear the iterative nature of the process, with additional proposals likely coming after feedback from industry and others.

But to the extent that Washington has become consumed by the midterm elections fewer than six months away, the high-profile event Friday allowed Republicans and the president to say they have a plan to bring down drug prices—an important political objective in and of itself.

This post was originally published at The Federalist.

What You Need to Know about “Vote-A-Rama”

It’s not a carnival ride—although it might prove even more adventurous. The Senate’s consideration of health-care legislation will soon result in a grueling series of votes dubbed “vote-a-rama.”

After 20 hours of debate on the budget reconciliation measure, equally divided between the majority and minority parties, the Senate will complete consideration of all pending amendments, with the process’ conclusion typically determined when senators exhaust all the amendments they wish to offer—not to mention themselves.

1. It’s Physically Demanding

The “vote-a-rama” process during consideration of the 2010 reconciliation bill that “fixed” Obamacare provides an example. On Wednesday, March 24, senators began voting on amendments at 5:32 PM. Nearly nine hours later, at 2:17 on the morning of Thursday, March 25, senators had completed votes on 29 amendments. The Senate then took a brief break, re-convened at 9:45 the same morning, and disposed of a further 12 amendments over an additional four-plus hours, with a vote on final passage at 2 PM on March 25.

For 20-something or 30-something staffers—let alone senators several times their age—this lengthy process can prove grueling, with long hours, late nights, lack of sleep, and little food (or bad food) the norm.

2. It’s Mentally Confusing

Between votes on amendments, senators usually allow for brief one-minute speeches by the amendment’s proponent and an opponent (generally the majority or minority floor manager of the bill). However, as Senate procedural expert James Wallner notes, that habit has derived from custom and unanimous consent, not any formal rule. If any senator objects to the brief “well speeches” as part of “vote-a-rama,” then the Senate will vote on amendments without any debate or a summary of what the amendment does.

3. It’s Hard to Pass Amendments with a Simple Majority…

As Wallner noted in an article earlier this week, the Senate’s rules essentially give preferential treatment to the underlying reconciliation bill, making it difficult to craft amendments that can pass with a simple (i.e., 50-vote) majority. The amendment must be germane (i.e., relevant) to the underlying bill, and cannot increase the deficit.

Moreover, to pass with a simple majority, an amendment must also comply with the six-part “Byrd rule” test. For instance, an amendment may not have only an incidental fiscal impact, make programmatic changes to Title II of the Social Security Act, or exceed the jurisdiction of the committees who received the reconciliation instructions (in this case, the Senate Finance and Health, Education, Labor, and Pensions committees). Other than simple motions striking particular provisions, amendments will face a difficult time running the procedural gauntlet necessary to pass on a 50-vote threshold.

4. …But It’s Easy to Get Amendment Votes

Even if an amendment does not comply with the budget reconciliation rules, senators can still offer a motion to waive those rules. The motion to waive requires the approval of three-fifths of senators sworn (i.e., 60 votes), which often does not materialize, but the motion to waive provides a way to get senators on the record on a specific issue. Many votes in a “vote-a-rama” series consist of a “motion to waive all applicable budgetary discipline”—i.e., the “Byrd rule” and other restrictions that make passing an amendment with a simple majority difficult.

5. It Will Result in Messaging Amendments

(b) Prohibiting Coverage of Certain Prescription Drugs—

(1) In general.–Health programs administered by the Federal Government and American Health Benefit Exchanges (as described in section 1311 of the Patient Protection and Affordable Care Act) shall not provide coverage or reimbursement for—

(A) prescription drugs to treat erectile dysfunction for individuals convicted of child molestation, rape, or other forms of sexual assault;

The “No Viagra for Sex Offenders” amendment drew no small amount of attention at the time, and led to political ads being run against the Democrats who voted against it (as some predicted prior to the amendment vote).

Democrats will almost certainly offer similar messaging amendments this year, including amendments unrelated to the bill, or even health care. They may offer amendments regarding the Russia investigation—those would likely be subject to a 60-vote threshold, as foreign policy is not germane to a budget reconciliation bill, but if Democrats wish to get Republicans on record, any vote will do.

Doubtless Democrats will offer amendments related to Donald Trump’s taxes—the reconciliation bill is in the jurisdiction of the Finance Committee, so these amendments could theoretically prove germane, but amendments specifically targeting the president (i.e., making policy, with only an incidental fiscal impact) could violate the “Byrd rule,” making them subject to a 60-vote threshold. For Democratic political consultants, the possibilities are virtually endless.

6. It May Lead to Chicanery—and ‘Strategery’

While opposing reimportation on the merits, some Republicans supported these particular amendments because they wanted to break up the “rock-solid deal” between Democrats and Big Pharma—whereby pharma agreed to support Obamacare in exchange for a promise from Democrats not to support reimportation of prescription drugs.

As it happened, Democrats spent an entire week—from December 8 through December 15, 2009—without floor votes on amendments to Obamacare. The delay—effectively, Democrats filibustering their own bill—came in part because party leaders could not persuade fellow Democrats to vote against the reimportation amendment—and could not afford to allow the amendment to pass.

One can expect similar gamesmanship by the Democratic minority this time around, as evidenced by their tactical decision to abstain from voting on Tuesday’s motion to proceed to the bill until Republican senators mustered a majority solely from within their own ranks. If only three Republicans defect on an amendment, Democrats could have the power to play a decisive role in that amendment’s outcome. It’s an open question how they will do so.

For instance, will some or all of the 12 Democrats who voted against reimportation earlier this year—during January’s “vote-a-rama,” when the Senate passed the budget enabling the current reconciliation process—switch their votes so the amendment will pass, causing Republicans heartburn with the pharmaceutical lobby? When and how will Democrats use other tactical voting to gum up the process for Republicans? The answers range from possible to likely, but it remains to be seen exactly how the process will play out.

7. It Will Inflict Political Pain

Consider for instance a flashpoint in the reconciliation bill: Whether to defund Planned Parenthood. Two Republican senators, Susan Collins and Lisa Murkowski, have already stated they oppose defunding the organization. If one more Republican defects, Democrats would likely have the votes to strip the defunding provision. (While Democratic Sen. Joe Manchin previously supported defunding Planned Parenthood two years ago, in the immediate aftermath of sting videos featuring organization leaders, he has since reversed his position, and will presumably vote with all Democrats to strip the provision.)

To put it another way: Sen. Dean Heller (R-NV) may not just have to be the 50th vote supporting the underlying bill, he may also have to provide the 50th vote to keep the Planned Parenthood defunding provision in the legislation. Will Heller vote to defund the nation’s largest abortion provider—and what will happen to the bill if he, and the Senate as a whole, votes to strip the provision out? Senate leaders will face several of these white-knuckle amendment dramas during “vote-a-rama,” any one of which could jeopardize the entire legislation.

8. It Could Unravel the Entire Bill

Ultimately, with no agreement among Republicans to preserve the underlying bill text, and no clear roadmap on how to proceed, “vote-a-rama” could resemble pulling on the proverbial thread—one good tug and the whole thing unravels. What if Heller ends up helping to strip out Planned Parenthood defunding—and conservatives respond by blocking more funding for Medicaid expansion states? What if moderates vote to strip the “consumer freedom” amendment offered by Sen. Ted Cruz (T-TX), and conservatives retaliate by taking out the “side deals” included to assuage moderates’ concerns?

At the end of “vote-a-rama,” senators could be left with an incoherent policy mess, legislation that no one would readily support. It’s the big potential downside of the freewheeling amendment strategy—but a chance that McConnell apparently feels he has no other choice but to take.

9. It’s Why Senate Leadership Is Talking about a Conference with the House

In recent days, Senate Majority Whip John Cornyn (R-TX) and others have floated the idea that, rather than having the House pass the Senate’s bill whole, sending it straight to the White House, members may instead want to have a House-Senate conference to resolve differences between the two chambers. Some have gone so far as to propose the Senate passing a “skinny” bill—repeal of the individual and employer mandates, along with the medical device tax—as a placeholder to get the reconciliation measure to a conference committee.

This strategy would have one beneficial outcome for the Senate’s Republican leadership: By allowing congressional leaders to re-write the bill in conference, it would save them from having to abide by the results of “vote-a-rama.” If, for instance, senators vote to strip out Planned Parenthood defunding, or to add in reimportation language, congressional leaders could re-write the bill in conference to negate the effects of those votes—presenting a new measure to both chambers with a binary choice to approve the bill or not. (In other words, rather than a “wrap-around bait-and-switch” on the Senate floor, senators could instead face a bait-and-switch in conference.)

That leadership has mooted a conference committee speaks to the nature of the “vote-a-rama” ahead. Despite the complaints on both ends of Pennsylvania Avenue about the lengthy nature of the health-care process, Senate leaders are now looking to extend the process further via a House-Senate conference—because they may need to regain control of the legislation after a wild and unpredictable debate on the Senate floor.

This post was originally published at The Federalist.

Vitter Amendment (#769, as Modified) on FDA Reimportation

Senator Vitter has offered an amendment (#769) regarding prescription drug reimportation.  The amendment is pending, and a vote on the amendment may occur later this evening.  
  • The amendment would prohibit the use of funds for the Food and Drug Administration “to prevent an individual…from importing a prescription drug from Canada that complies with the Federal Food, Drug, and Cosmetic Act.”
  • The amendment further provides that drugs reimported may not be controlled substances or a biological products.
  • The amendment prohibits the use of funds for the Food and Drug Administration “to change the practices and policies…in effect on October 1, 2011, with respect to the reimportation of prescription drugs into the United States…with respect to such importation by individuals from countries other than Canada.”
  • The Senate last considered prescription drug reimportation in 2009, during debate on the health care bill (H.R. 3590, 111th Congress).  At that time, a Dorgan amendment (#2793) regarding remportation failed on a 51-48 vote (60 votes were required for adoption).  Press reports from that time indicated that some Senate Democrats considered the amendment a “threat” because it would jeopardize the “rock-solid deal” Democrats made with the pharmaceutical industry.
  • In May 2007, the Senate considered reimportation in the context of FDA reauthorization (S. 1082, 110th Congress).  At that time, a Dorgan amendment (#990) regarding reimportation was adopted by unanimous consent, following a 63-28 vote to invoke cloture.  However, according to the Congressional Research Service, the Dorgan amendment was “effectively negated” by a second-degree Cochran amendment (#1010), which required the Secretary of HHS to certify that reimportation would 1) pose no additional public health risk and 2) “result in a significant reduction of cost” to consumers.  That second-degree Cochran amendment was adopted on a 49-40 vote.
  • In May 2006, the Senate considered a reimportation amendment as part of the Homeland Security appropriations measure (H.R. 5441, 109th Congress).  The Vitter amendment (#4548), which blocked Customs and Border Protection from enforcing prescription drug reimportation from Canada, passed on a 68-32 vote, and was ultimately included as Section 535 of the appropriations conference report (P.L. 109-295).
  • This amendment is a limitation-of-funds provision.  Under Rule XVI, any additional provisions would not be germane to the underlying appropriations measure.  In other words, this amendment differs from stand-alone reimportation legislation (S. 319) introduced earlier this year.
  • The amendment would only prohibit FDA from enforcing reimportation regulations regarding drugs from Canada, and not pharmaceuticals reimported from other countries.
  • Supporters of reimportation argue that the measure would result in drug price reductions for American seniors, while opponents of reimportation argue that other countries’ pharmaceutical supplies would raise concerns about drug safety.

UPDATE: Three additional points of note regarding this amendment:

  • A vote on the Vitter amendment (as modified) on reimportation is now scheduled for the noon vote series, and will be subject to a 60-vote threshold for adoption.
  • In my background section above, I neglected to mention a second reimportation vote in the 111th Congress, one that was NOT tied into the broader health care debate.  In July 2009, a Vitter reimportation amendment (#1467) was agreed to on a 55-36 vote.
  • Finally, the amendment omits language included in several prior reimportation amendments – including that in Section 535 of P.L. 109-295 – that prohibited reimportation enforcement “only to individuals transporting on their person a personal use quantity” of pharmaceuticals, “not to exceed a 90-day supply.”  Because the Vitter amendment excludes the preceding language, it has the effect of also permitting reimportation via mail order and Internet pharmacies based in Canada – which is a change from several of the prior reimportation amendments that were adopted.

Barack Obama and “Big Pharma:” Hypocrisy You Can Believe In

“I’m appalled by the deal the White House has made with the pharmaceutical industry’s lobbying arm to buy their support….When an industry gets secret concessions out of the White House in return for a promise to lend the industry’s support to a key piece of legislation, we’re in big trouble. That’s called extortion.”

— Former Clinton Administration Labor Secretary Robert Reich, blog posting, August 9, 2009


Even as he campaigned on a platform of change and transparency, an examination of Barack Obama’s comments during the election—and his actions since taking office—indicates that on both politics and policy, the President has changed his tune on numerous issues of relevance to the pharmaceutical industry—perhaps as a result of up to $150 million in drug industry-funded advertisements supporting his government takeover of health care:

Then: “We’ll take on the drug and insurance companies and hold them accountable for the prices they charge and the harm they cause.”

— Barack Obama, speech in Newport News, Virginia, October 4, 2008

Now: “We were assured: ‘We need somebody to come in first. If you come in first, you will have a rock-solid deal.’”

— PhRMA head Billy Tauzin, discussing his negotiations with the White House, New York Times, August 5, 2009

Then: “I urge [my opponent] to stop siding with the drug manufacturers and put aside his opposition to the re-importation of lower-priced prescription drugs from Canada.”

— Barack Obama, Senate campaign press release, May 21, 2004

Now: “On July 7, Rahm Emanuel, Mr. Obama’s chief of staff…assured at least five pharmaceutical companies during a White House meeting that there would be no provision in the final health care package to allow the re-importation of cheaper drugs from Canada or elsewhere.”

New York Times, July 23, 2009

Then: “And we’ll tell the pharmaceutical companies, thanks but no thanks for the overpriced drugs—drugs that cost twice as much here as they do in Europe and Canada. We’ll let Medicare negotiate for lower prices.”

— Barack Obama, speech in Newport News, Virginia, October 4, 2008

Now: “The White House…clarified its commitment to a behind-the-scenes deal….[that] would limit the drug makers’ share of the cost of a health care overhaul…without imposing other savings…like the government’s negotiation of prices for the drugs it buys under Medicare.”

New York Times, August 7, 2009

Then: “What we will do is, we’ll have the [health care] negotiations televised on C-SPAN, so that people can see who is making arguments on behalf of their constituents, and who are making arguments on behalf of the drug companies or the insurance companies.”

— Barack Obama, town hall meeting in Chester, Virginia, July 21, 2008

Now: “At a certain point you start getting into all kinds of different meetings—Senate Finance is having a meeting, the House is having a meeting….I don’t think there are a lot of secrets going on in there.”

— Barack Obama, trying to explain closed-door health care negotiations, White House press conference, July 22, 2009

Then: “It’s an entire culture in Washington—some of it legal, some of it not—that allows [scandals] to happen. Because what’s most outrageous is not the morally offensive conduct on behalf of these lobbyists and legislators, but the morally offensive laws and decisions that get made as a result.”

— Barack Obama, speech on “Taking Our Government Back,” July 22, 2007

Now: “[The White House] wanted a big player to come in and set the bar for everybody else.”

— PhRMA head Billy Tauzin, quoted in New York Times, August 5, 2009

Then: “We need a President who sees government not as a tool to enrich well-connected friends and high-priced lobbyists, but as the defender of fairness and opportunity for every American. That’s what this country has always been about, and that’s the kind of President I intend to be.”

— Barack Obama, speech on “Taking Our Government Back,” July 22, 2007

Now: “President Barack Obama’s push for a national health care overhaul is providing a financial windfall…to Democratic consulting firms that are closely connected to the President and two top advisors.”

— Associated Press story, August 19, 2009

Then: “When I am President, I will make it absolutely clear that working in an Obama Administration is not about serving your former employer, your future employer, or your bank account—it’s about serving your country, and that’s what comes first. When you walk into my Administration, you will not be able to work on regulations or contracts directly related to your former employer for two years.”

— Barack Obama, speech on “Taking Our Government Back,” July 22, 2007

Now: “Two firms that received $343.3 million to handle advertising for Barack Obama’s White House run last year have profited from his top priority as President by taking on his push for [a] health care overhaul….[One] firm owes [White House senior advisor] David Axelrod $2 million, which it’s due to pay in installments beginning December 31. Axelrod’s son, Michael, still works there.”

— Bloomberg story, August 15, 2009

At best, the significant changes in position show the differences between lofty campaign rhetoric and the realities of governing; at worst, they reveal an Administration seduced by promises of campaign-style ads supporting its government takeover of health care. Moreover, the Congressional Budget Office recently announced that the provisions in House Democrats’ government takeover of health care (H.R. 3200) would raise seniors’ Medicare prescription drug premiums by 20 percent—even as pharmaceutical companies, sensing higher profits, promote the President’s “reform” agenda. Regardless of whether or not Members agree with the President’s policy positions—either those outlined “then” or “now”—many may wonder what exactly the President believes in—and, given his repeated reversals, why the American people should believe in him.