However, the plan will now move forward without a provision that would have penalized drugmakers for raising costs faster than inflation for Medicare and private insurance plans.
Removing price caps on private insurance means there is little left that will lower costs for the vast majority of Americans who get health insurance through their private sector employer. Democrats are still waiting for a separate parliamentary decision on their policy to cap the cost of insulin both inside and outside Medicare.
The decision also means tens of billions less in federal savings in the overall bill, a potential threat to Democrats’ hopes of offsetting the cost of bolstering Obamacare subsidies.
Still, Democrats argue the bill will move forward in the coming weeks with its most important provision intact: the repeal of the federal government’s longstanding ban on directly negotiating drug prices with drug companies.
Senate Majority Leader Chuck Schumer Saturday described the parliamentarian’s sentence as “good news” in a statement.
“Medicare will finally be allowed to negotiate prescription drug prices, seniors will have free vaccines and their costs capped, and much more,” he said.
Rep. Peter Welch (D-Vt.), a key negotiator of the House version of the bill, said the provision would “break the iron curtain that Big Pharma has maintained against drug price negotiation, and that is changing the game. If approved, Pharma won’t be able to continually stick it to the consumer at their will and whim. And that’s especially important with inflation hitting people at the pump and the grocery store.”
But Welch, who is running to replace the retiring senator. Patrick Leahy (D-Vt.), acknowledged that the lawmaker’s ruling remains a big win for the pharmaceutical industry.
“It would essentially mean that drug companies would be able to raise prices well beyond inflation,” he said in an interview in the days before the vote.
Drug companies and Senate Republicans had planned for months to target the inflation cap provision, through a process known on Capitol Hill as the “Byrd bath.” Sen. Mike Crapo (R-Idaho), the top Republican on the Senate Finance Committee, told reporters they went through the bill “line by line” in an effort to lay out every challenge they could find.
Democrats who have pushed the policy for years were confident it could pass under the Senate’s strict reconciliation rules, which limit what types of bills can pass with a simple majority. Only proposals that are primarily related to federal spending or revenue can fly, but not those that make major policy changes and have only an “incidental” impact on the federal budget.
Democrats argued that the bill needs inflation caps on drug prices to work, warning that not doing so will mean drug companies can raise prices even higher for people with private insurance to make up for what they lose because of the cost. controls the bill that still imposes on Medicare.
Sen. Chris Murphy (D-Conn.) said those points are “typically the kind of argument that’s persuasive with the congressman.”
“You can’t untangle the private sector from the public sector – one doesn’t work without the other,” he said.
Supporters of the provision also pointed to the Congressional Budget Office’s finding last year that the inflation cap provision would save the government about $80 billion over a decade to argue that it should be allowed to remain in the bill.
However, reconciliation experts and industry insiders were equally confident that the provision would be removed from the package.
“A lot of people think that if something gets a significant CBO score, it can’t be considered incidental, but it’s more about whether the policy implications outweigh the budget implications,” said Stephen Northrup, a lobbyist who previously worked as a health policy . director of the Senate Committee on Health, Education, Work and Pensions. “If the inflation cap was limited to Medicare, you could make a very direct relationship between the policy and the score. But when you expand it to the commercial market, the relationship becomes more tenuous. It looks less like you’re trying to save money than not. not extend a policy that has an impact beyond the federal budget.”
Democrats currently do not have a backup plan for the policy, although some advocates are now pushing to try to apply inflation caps to other federal insurance programs like Medicaid and insurance for federal employees.
Even if they are able to do that, progressives who originally pushed for much broader controls on drug prices are disappointed that their already watered-down plan has grown even weaker over the past year.
President of Finance of the Senate Ron Wyden (D-Ore.), who worked for months crafting the drug pricing language and wrangling the votes to pass it, blamed drug industry influence on Capitol Hill for the demise of the cap provision of inflation
“Special interests always work against getting relief to hard-hit Americans, especially seniors,” he told POLITICO before the lawmaker’s decision. “So what a surprise that the special interests, and you’ve seen the numbers of how many lobbyists they have, are trying to protect their profits.”