Sen. Robert Menendez (D-N.J.) is posing a significant obstacle to a Democratic Senate bill aimed at lowering prices of prescription medication by allowing Medicare to negotiate with drug makers.
Senate aides and lobbyists say if Menendez gets his wat, the proposal may not apply to millions of people who get health insurance through their jobs, prompting alarm from employers and progressive groups.
Democrats’ signature drug pricing measure, set to be included in their coming $3.5 trillion package, would allow the secretary of Health and Human Services to negotiate lower drug prices, a long-held Democratic goal.
The House measure would apply those lower negotiated prices not only to seniors on Medicare, but also to the roughly 150 million Americans who get health insurance through their employers.
Menendez does not want to crack down too hard on the pharmaceutical industry, which supplies a great deal of financial support to his campaign organization.
“Health care in the U.S. leaves too many people out, costs too much and fails to meet acceptable standards of quality which is why the U.S. often ranks dead last for treatment outcomes,” said Lisa McCormick, the New Jersey Democrat who challenged Menendez in the 2018 primary election. “Much of the care that we get is unaffordable, unnecessary or harmful and corrupt politicians keep it that way.”
Among her differences with the incumbent that she highlighted in the 2018 campaign, McCormick advocated Medicare for All, stronger oversight of dangerous doctors and pharmaceutical.
Progressive House Democrats have supported legislation to also require drug makers to offer any price negotiated with Medicare to commercial plans but it remains unclear whether that provision will be included in any final language of the bill.
Pharmaceutical industry sources gave Menendez-controlled political funds at least $1,165,996, according to OpenSecrets.org, a government watchdog that provides data and analysis from Federal Election Commission reports filed by candidates.
“Despite spending far more on health care than any other nation, the U.S. continues to have the worst health care system compared with those of other industrialized countries,” said McCormick. “Although it involves many complex issues, one of the reasons we spend so much and get so little is because Bob Menendez defeated me in 2018.”
Senate Democrats hope to include legislation giving Medicare the power to negotiate with drug makers for lower prices in a massive $3.5 trillion infrastructure package that is key to President Joe Biden’s agenda.
Menendez isn’t ready to commit to voting for a budget blueprint that will count on hundreds of billions of dollars extracted from the prescription drug industry to help offset $3.5 trillion in new spending over a decade.
“I’m not ready to make any decisions on the budget resolution,” Menendez told reporters Thursday, as he called plans to have Medicare negotiate drug prices a tax on pharmaceutical companies.
“The only industry that gets directly, I’ll call taxed, mostly is the pharmaceutical industry. You have to show me that you’re reducing the cost of prescription drugs to the consumers,” Menendez said. “Because you keep taking money out of the industry and we never use it in a way that helps the consumer.”
Senators announced the framework for the package late Tuesday, but several details are yet to be hammered out. Democrats already announced that the package will expand Medicare benefits to offer dental, vision and hearing.
Menendez previously voted against a price negotiation amendment during the Senate Finance Committee’s 2019 markup of a bipartisan bill led by Sen. Charles E. Grassley.
Several of the world’s largest pharmaceutical and biotech companies by revenue and research and development spending are headquartered in or have a large presence in Menendez’ home state of New Jersey. The list includes Johnson & Johnson; Bristol Myers Squibb; Merck & Co.; Pfizer Inc.; and Paris-based Sanofi and Novartis AG, headquartered in Basel, Switzerland, among others.
Senate Budget Chairman Bernie Sanders has said more than $600 billion could be wrung out of various proposals to cut drug costs, mainly through government negotiation to cap prices at a level commensurate with those of other wealthy countries.
When asked if the legislation will include giving Medicare drug price negotiation powers, Senate Finance Committee Chairman Ron Wyden (D-Ore.) said “no question about it.”
“The American people are overwhelmingly of the view that when you have 50 million seniors plus in Medicare, the program ought to negotiate to get them a good deal,” Wyden told reporters. “Who in the world doesn’t negotiate when you got all those people who are counting on you?”
Wyden released a list of principles earlier this year that outlined how Congress should handle drug prices. Chief among them was that Medicare must have negotiating authority, “especially when competition and market practices are not keeping prices in check,” the document said.
But in the Senate, the push is running into an obstacle from the complicated rules in the upper chamber. The “Byrd rule,” requires that provisions have a sufficient impact on the federal budget.
Lowering drug prices for people with private insurance does not have as direct of an impact on the federal budget as lowering prices with Medicare.
Employer and progressive groups are pushing for the lower drug prices to apply to people with private insurance as well, saying all Americans, not just those on Medicare, need relief.
Furthermore, employer groups warn that if prices only apply to Medicare, drug companies will simply raise prices in the private insurance market, shifting costs onto them.
Nearly 40 labor, business, consumer, and health care organizations sent a letter this summer calling on Congress to pass legislation to allow Medicare to negotiate lower drug prices.
On August 19, 2021, Families USA led over 75 national, state, and community organizations in thanking five key senators who courageously filed an amendment that declared strong support for including Medicare negotiation within reconciliation provisions to address prescription drug prices.
James Gelfand, senior vice president for health policy at The ERISA Industry Committee, an employer group, said that employers would oppose the drug provisions in the bill unless the lower drug prices extend to the employer market.
“If you can’t find a way to protect the private sector, then the bill could mean explosive drug price increases for employers and working families,” he said.
Backers argue that if lawmakers really believe in extending lower drug prices to the private market, they can find a way to do it within the rules.
For example, Gelfand said one alternative that his group is pushing that could comply with the Byrd rule is to impose an excise tax on drug companies that set prices in the employer market above the negotiated rate.
However, the situation is still fluid and could change.
Wyden, who is leading the Senate’s drug pricing effort, has expressed support in the past for extending lower prices to the employer-sponsored insurance market.
On Tuesday, asked about the fate of the provisions for the private market, a Senate Finance Committee aide said: “These policies have not yet been finalized.”
Steve Knievel, an advocate at the progressive group Public Citizen, said: “Limiting the benefits of drug price negotiation to Medicare beneficiaries would leave tens of millions of Americans at the mercy of drug corporations’ monopoly pricing.”
In addition to Senate rules, Wyden is also navigating delicate politics as he tries to find a balance between moderate and progressive Democrats in a 50-50 Senate — the party cannot lose a single vote on the measure.
The Senate bill is also likely to leave out a provision to use the prices paid on drugs in other countries as a benchmark in the U.S., an idea known as “international reference pricing.”
The bill could instead use a “domestic reference price,” though the details on that proposal are not clear.
Patients For Affordable Drugs Now launched a six-figure campaign encouraging Menendez to support legislation to lower drug prices by allowing Medicare negotiation. The push began on July 2 and includes TV ads, digital ads, and grassroots advocacy, in which patients will write and call Menendez directly.
“In the last year, 2 million New Jersey families could not pay for medicine or drugs prescribed by their doctor,” said David Mitchell, a cancer patient and founder of Patients For Affordable Drugs Now. “New Jerseyans are depending on Senator Menendez to help by ensuring Medicare can negotiate lower drug prices and that the savings go towards reducing costs for patients and consumers.”
Wyden’s guiding principles for drug pricing reform are being considered for inclusion in the Democrats’ reconciliation budget package later this year.
“As the Senate Finance Committee develops detailed legislative proposals, we need Senator Menendez to lead on drug pricing reform that will deliver the innovation patients need at prices we can afford. We can have both,” Mitchell said.
The campaign includes a new video ad featuring multiple sclerosis patient and registered nurse Therese Ball, who manages her symptoms with a prescription for Tysabri, which is priced at $7,463 each month.
“As a nurse, I had patients who struggled to pay for their prescription drugs. When I was diagnosed with MS, I became one, too. The medications I need to live are priced at over $7,000 every month,” Ball, a grandmother and retired nurse, says in the video ad. “I can’t afford these prices. I had to ration and skip doses.”
“Congress is working to let Medicare negotiate lower drug prices. Ninety percent of Americans support it, and Senator Menendez should, too,” the ad says. “Patients need this reform, and we need his support.”
Another new video from the patient’s group exposes how Big Pharma’s recent multi-million dollar ad campaigns are full of lies about how Medicare negotiation would limit access to drugs.
Menendez is not the first New Jersey corporate Democrat to threaten the once-in-a-century Bipartisan Infrastructure Bill, officially called the Infrastructure Investment and Jobs Act, which Biden says will help create two million jobs a year over the next decade, fix our nation’s crumbling infrastructure and fight climate change.
Wall Street darling Rep. Josh Gottheimer tried to derail the Biden investment package in an attempt to open a bigger tax cut for wealthy homeowners who pay more than $10,000 in property taxes.