CBO: Democrats’ package saves about $160B on drug prices

Provisions to lower prescription drug prices in President Biden’s Build Back Better package would save the government about $160 billion over a decade, according to a Congressional Budget Office (CBO) estimate released Thursday.

That includes about $80 billion in savings from allowing Medicare to negotiate lower drug prices in limited instances, and another roughly $80 billion in limiting drug price increases to the rate of inflation.

Republicans and pharmaceutical companies have attacked the legislation as harming innovation and leading to fewer treatments. 

The CBO estimated that the measure would result in one fewer drug coming to market in the next decade, followed by four in the following decade and five in the decade after that. That’s out of about 1,300 drugs expected to be approved in those 30 years. 

The measure included in Democrats’ legislation, which could pass the House as soon as Thursday night, is scaled back from earlier, more sweeping proposals Democrats have put forward to lower drug prices.

For comparison, Speaker Nancy Pelosi’s (D-Calif.) measure from 2019 would have saved about $450 billion from negotiating lower drug prices, though that measure also would have led to eight fewer drugs coming to market over a decade, CBO said in 2019, compared to one fewer drug in this bill. 

Democrats had to scale back the latest measure to meet the demands of a handful of moderates, including Sen. Kyrsten Sinema (D-Ariz.) and Rep. Scott Peters (D-Calif.), who worried the more far-reaching version would harm innovation. 

In a concession to those moderates, the measure allows Medicare to negotiate lower prices only for older drugs that no longer have “exclusivity,” meaning the period when they are protected from competition. 

That translates to nine years for many drugs and 13 years for complex “biologics.”

The measure also caps out-of-pocket costs for drugs at $2,000 per year for seniors on Medicare, and at $35 per month for people taking insulin. 

Other health care provisions in the package would extend enhanced financial assistance under ObamaCare that helps people afford their premiums, and subsidize coverage for about 2 million people falling through the cracks in the 12 GOP-led states that have refused to expand Medicaid. 

CBO estimates that in total 3.4 million fewer people would be uninsured under the bill. 

CBO says the measure would also save about $140 billion from repealing a Trump administration rule seeking to reform how drug companies give discounts to companies known as pharmacy benefit managers. But that rule has never actually gone into effect.