Essentially, H.R. 3 contains three main elements. First, it recognizes that out-of-pocket costs for many patients are too high, and to that end it fundamentally restructures the Medicare Part D benefit to provide financial relief for a large number of Part D beneficiaries. At present, Part D places no cap on patients’ cost sharing, and more than one million Medicare beneficiaries have out-of-pocket costs in the many thousands of dollars each year. H.R. 3 caps beneficiaries’ out-of-pocket costs at just $2,000 (Section 301).
Second, H.R. 3 recognizes that our existing drug pricing systems create incentives for drug companies to raise their list prices over time, often much more rapidly than inflation. As such, it aims to control and potentially reverse price increases for drugs in both Medicare Part B (Section 201) and Part D (Section 202). The package would require manufacturers of all drugs sold to either program who have raised the relevant prices of their drugs more rapidly than inflation since 2016 to either lower the price of the drug or pay the above-inflation amount back to the Treasury as a rebate. A progressive amendment added on December 10 seeks to extend these protections to drugs covered under employer health plans.
Third, H.R. 3 aims to tackle the underlying problem of high drug prices by providing the Secretary of Health & Human Services (HHS) with authority to negotiate some prescription drug prices both for Medicare and for the private market (Section 101). H.R. 3 empowers the Secretary to negotiate prices on a minimum of 50 and up to 250 branded drugs with the greatest cost to the health care system. To facilitate this negotiation, H.R. 3 creates an international price index (of a drug’s volume-weighted average price in six countries) to be used as a target price ceiling.
