Drug industry scrambles after rare loss in budget deal

Pharmaceutical companies are pushing to repeal or roll back a provision in last week’s budget deal that delivered a rare loss to their industry, according to two lobbyists familiar with the situation. 

A provision included in the budget deal approved last week raised the share of costs that drug companies have to pick up as part of closing the “donut hole,” a gap in drug coverage for Medicare Part D beneficiaries. 

Drug companies are quickly mobilizing to try and undo the change, or at least roll it back in some fashion. The most likely avenue is the long-term government funding bill that Congress is expected to pass in March, the lobbyists said.    

{mosads}The budget deal raised the share of costs in the donut hole that drug companies have to pick up from 50 percent to 70 percent. The drug companies are pushing proposals that would put the share at 60 percent or even lower, sources say.

One powerful figure involved with the issue, Senate Finance Committee Chairman Orrin Hatch (R-Utah), is concerned about the provision in the budget deal and is in favor of changing it, his office said.

“Some of the offsets, particularly related to Medicare Part D that my Democratic colleagues insisted being in this package, are very troubling to me,” Hatch said on the Senate floor last week, referencing the provision. “And I look forward to working with my colleagues to address this moving forward.” 

Democrats are pushing back. 

“It’s not surprising that with the ink barely dry, Republicans are pledging to protect Big Pharma at the expense of higher drug costs for seniors,” said a Senate Democratic aide.

The change in the budget deal would not go very far in reducing drug costs for patients, though it does impose some new costs on drug companies. The proposal was not championed by groups that want action to lower drug prices.

A higher priority for drug pricing advocates is a separate bill called the Creating and Restoring Equal Access to Equivalent Samples (Creates) Act, which cracks down on drug companies using delay tactics to prevent cheaper generic competitors from entering the market. That bill was not part of the budget deal.

“Pharma refuses to be part of any solutions that lower drug prices for Americans,” Ben Wakana, executive director of the group Patients for Affordable Drugs, wrote in an email Wednesday. “If Congress is entertaining this change, it must also pass the CREATES Act in order to increase competition and stop patent abuse.” 

The Creates Act is also fiercely opposed by the pharmaceutical industry.

Stephen Ubl, the CEO of the Pharmaceutical Research and Manufacturers of America, the main drug industry trade group, called for repealing the change from the budget deal in a statement on Monday. 

He noted that a study from the consulting firm Avalere found insurers would benefit from the provision far more than patients would. The provision shifts some costs currently being picked up by insurers onto drug companies instead. The insurer share of costs would drop from 25 percent to 5 percent, the study notes. 

“Congress should repeal the harmful Part D changes in the recent budget deal and instead pursue additional reforms to improve affordability and predictability for seniors, such as adding an out-of-pocket maximum as called for in the president’s budget request,” Ubl said. 

Insurers pushed back on Ubl’s comments, noting that Avalere also found some savings for beneficiaries and the federal government. 

“They seem to have conveniently overlooked the benefit to consumers and taxpayers,” Kristine Grow, a spokeswoman for America’s Health Insurance Plans, said of PhRMA. “Let’s talk about what really matters here.”

One lobbyist familiar with the discussions said that securing from Congress even a small drop in the share of costs that drug companies must pay would be helpful to their bottom lines.

“Every percentage point counts,” the lobbyist said.

Updated at 2:25 p.m.