Risk & Compliance

Pelosi’s Drug Plan Would Save Medicare $345B

House Democrats say a CBO analysis shows the bill will "rein in the soaring cost of prescription drugs and level the playing field for American pat...
Matthew HellerOctober 15, 2019
Pelosi’s Drug Plan Would Save Medicare $345B

House Speaker Nancy Pelosi’s bill to lower drug prices would save Medicare $345 billion between 2023 and 2029 but reduce the flow of new medications, according to the Congressional Budget Office.

In a preliminary analysis of the measure, the CBO focused on its main provision, which would allow the secretary of Health and Human Services to negotiate lower prices on up to 250 drugs per year, with savings applied to both Medicare and people on private insurance plans.

Prices for those drugs could not exceed 120% of the average price in certain other countries. According to the CBO, the biggest savings would come in 2028 at $93 billion.

“This initial analysis proves that H.R. 3 will effectively rein in the soaring cost of prescription drugs and level the playing field for American patients,” three House Democratic chairmen — Frank Pallone Jr. of New Jersey, Richard Neal of Massachusetts, and Bobby Scott of Virginia — said in a news release.

Pelosi and other House Democratic leaders have been working for months on the legislation, which is expected to move through House committees to a vote on the floor as soon as the end of this month.

“The measure is one of [House Democrats’] top priorities, and one they have touted as showing they are focused on kitchen table issues even as they pursue an impeachment inquiry against President Trump,” The Hill reported.

But the CBO also said that while “In the short term, lower prices would increase use of drugs and improve people’s health,” the reduction in manufacturers’ revenues would over the long term “result in lower spending on research and development and thus reduce the introduction of new drugs.”

A reduction in drugmakers’ revenues of $500 billion to $1 trillion would lead to a reduction of approximately eight to 15 new drugs coming to market over the next 10 years, the CBO preliminarily estimated.

“CBO’s report confirms House Democrats’ ‘dictate or destroy’ price controls only serve to hurt the development of future cures and damage American innovation,” Rep. Kevin Brady of Texas, the top Republican on the Ways and Means Committee, said.

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