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CBO: Pelosi Bill Will Save Hundreds of Billions, Reduce Number of New Drugs to Market

Posted 14 October 2019 | By Zachary Brennan 

CBO: Pelosi Bill Will Save Hundreds of Billions, Reduce Number of New Drugs to Market

The Congressional Budget Office (CBO) late Friday announced that House Speaker Nancy Pelosi’s (D-CA) drug pricing bill would reduce federal direct spending for Medicare by $345 billion from 2023 to 2029, but it would also lead to a reduction of approximately 8 to 15 new drugs coming to market over the next 10 years.

The CBO report comes as rhetoric on both sides of the aisle has picked up in recent weeks, with industry group PhRMA referring to the bill, known as HR 3, as having catastrophic effects on the pharmaceutical industry's research and development, while supporters of the bill explain that prices for certain drugs in the US would still be the highest in the world as in some cases they could not exceed 120% of the average prices in Australia, Canada, France, Germany, Japan and the UK.

CBO also said that it expects the bill will push drug manufacturers to raise certain drug prices outside the US over time and they may not offer the same discounts in foreign countries that they do now.

“In the short term, lower prices would increase use of drugs and improve people’s health. In the longer term, CBO estimates that the reduction in manufacturers’ revenues from title I would result in lower spending on research and development and thus reduce the introduction of new drugs. CBO’s analysis of the bill is not complete; its preliminary estimate is that a reduction in revenues of $0.5 trillion to $1 trillion would lead to a reduction of approximately 8 to 15 new drugs coming to market over the next 10 years. (The Food and Drug Administration approves, on average, about 30 new drugs annually, suggesting that about 300 drugs might be approved over the next 10 years.)”

But that estimate may end up being conservative because from 2008 to 2018, FDA approved an average of 38 new drugs per year. Regardless, CBO said it’s unclear how the increased use of prescription drugs but decreased availability of some new drugs will impact the health of families in the US.

Peter Bach, director of Memorial Sloan Kettering's Center for Health Policy and Outcomes, explained on Monday on Twitter how the funds saved by Medicare should be taken into consideration. “The other half of the ledger should list what other good thing those free’d up funds could lead to (or be squandered on). The money does not evaporate it goes elsewhere,” he wrote.

And as with any new drug pricing legislation, there will be workarounds for companies.

“Over time, drug manufacturers might put in place mechanisms by which they can charge relatively high prices in other countries to avoid feedback that lowers U.S. prices while providing other forms of compensation that effectively reduce the net price of drugs in other countries,” CBO estimates.

The CBO score follows House Republican critiques of the bill as the negotiation provisions have been referred to as price controls because of the steep penalties that would be assessed on companies that refuse to negotiate.

CBO, meanwhile, said it is working on analyses of other effects of the Pelosi bill. On the Senate side, CBO said it's still working on a score for Sen. Chuck Grassley's (R-IA) drug pricing bill, which passed out of the Senate Finance Committee in July after a bipartisan vote of 19-9. A preliminary CBO score found the Grassley bill would save Medicare approximately $85 billion over the 2019-2029 period.

Effects of Drug Price Negotiation Stemming From Title 1 of H.R. 3, the Lower Drug Costs Now Act of 2019, on Spending and Revenues Related to Part D of Medicare

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