Medicare Drug Price Negotiation Act

II 117TH CONGRESS 1ST SESSION S. 908 To amend title XVIII of the Social Security Act to provide for the negotiation of lower covered part D drug prices on behalf of Medicare beneficiaries and the establishment and application of a formulary by the Secretary of Health and Human Services under Medicare part D, and for other purposes. IN THE SENATE OF THE UNITED STATES MARCH 23, 2021 Mr. SANDERS (for himself, Mr. BLUMENTHAL, Mr. BOOKER, Mrs. GILLI- BRAND, Mr. LEAHY, Mr. PADILLA, Mr. REED, Ms. SMITH, and Ms. WAR- REN) introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To amend title XVIII of the Social Security Act to provide for the negotiation of lower covered part D drug prices on behalf of Medicare beneficiaries and the establishment and application of a formulary by the Secretary of Health and Human Services under Medicare part D, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Medicare Drug Price 4 Negotiation Act’’. 5 VerDate Sep 11 2014 23:19 Apr 12, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S908.IS S908 pbinns on DSKJLVW7X2PROD with BILLS 2 •S 908 IS SEC. 2. NEGOTIATION OF LOWER COVERED PART D DRUG 1 PRICES ON BEHALF OF MEDICARE BENE- 2 FICIARIES; ESTABLISHMENT AND APPLICA- 3 TION OF FORMULARY BY THE SECRETARY OF 4 HEALTH AND HUMAN SERVICES UNDER 5 MEDICARE PART D. 6 (a) IN GENERAL.—Section 1860D–11 of the Social 7 Security Act (42 U.S.C. 1395w–111) is amended by strik- 8 ing subsection (i) (relating to noninterference) and insert- 9 ing the following: 10 ‘‘(i) NEGOTIATION OF LOWER DRUG PRICES; ESTAB- 11 LISHMENT AND APPLICATION OF FORMULARY.— 12 ‘‘(1) NEGOTIATION.— 13 ‘‘(A) IN GENERAL.—Notwithstanding any 14 other provision of law, subject to subparagraph 15 (B), the Secretary shall, for plan years begin- 16 ning with plan year 2023— 17 ‘‘(i) negotiate with pharmaceutical 18 manufacturers the prices (including dis- 19 counts, rebates, and all other price conces- 20 sions) that may be charged to PDP spon- 21 sors and MA organizations for covered 22 part D drugs furnished to enrollees; and 23 ‘‘(ii) complete such negotiations for a 24 plan year not less than 30 days before the 25 first day of the application review process 26 VerDate Sep 11 2014 23:19 Apr 12, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S908.IS S908 pbinns on DSKJLVW7X2PROD with BILLS 3 •S 908 IS for such plan year for new contracts or ex- 1 panding existing contracts with PDP spon- 2 sors and MA organizations to offer pre- 3 scription drug plans or MA–PD plans, re- 4 spectively. 5 ‘‘(B) USE OF FALLBACK IF NEGOTIATIONS 6 FAIL.— 7 ‘‘(i) IN GENERAL.—If, after negotia- 8 tions under subparagraph (A), the Sec- 9 retary is not successful in obtaining a rea- 10 sonable price for covered part D drugs in 11 accordance with clause (iii), the price that 12 may be charged to PDP sponsors and MA 13 organizations for such covered part D 14 drugs furnished to enrollees shall be the 15 lowest of the following: 16 ‘‘(I) The price applied pursuant 17 to section 8126 of title 38, United 18 States Code, for such drug for the 19 year. 20 ‘‘(II) The median price available, 21 during the most recent 12-month pe- 22 riod for which data is available from 23 the manufacturer to any wholesaler, 24 retailer, provider, health maintenance 25 VerDate Sep 11 2014 23:19 Apr 12, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S908.IS S908 pbinns on DSKJLVW7X2PROD with BILLS 4 •S 908 IS organization, nonprofit entity, or gov- 1 ernmental entity in Canada, the 2 United Kingdom, Germany, France, 3 and Japan. 4 ‘‘(III) The average manufacturer 5 price (as defined in subsection (k) of 6 section 1927) for such drug for the 7 most recent rebate period (as defined 8 in such subsection) applicable to such 9 plan year, reduced by the sum of the 10 applicable rebate factors for the drug 11 and rebate period. 12 ‘‘(ii) APPLICABLE REBATE FACTOR.— 13 For purposes of clause (i)(III), the term 14 ‘applicable rebate factor’ means, with re- 15 spect to a covered part D drug and a re- 16 bate period (as defined in section 1927(k)), 17 a dollar amount that applies for purposes 18 of determining the amount of a rebate that 19 is applicable to such drug for such rebate 20 period under— 21 ‘‘(I) paragraph (1)(A)(ii) of sec- 22 tion 1927(c); 23 ‘‘(II) paragraph (2)(A)(ii) of 24 such section; 25 VerDate Sep 11 2014 23:19 Apr 12, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S908.IS S908 pbinns on DSKJLVW7X2PROD with BILLS 5 •S 908 IS ‘‘(III) paragraph (2)(B) of such 1 section; 2 ‘‘(IV) paragraph (2)(C) of such 3 section; 4 ‘‘(V) paragraph (3)(A)(i) of such 5 section; or 6 ‘‘(VI) paragraph (3)(C) of such 7 section. 8 ‘‘(iii) GUIDANCE.—Not later than 60 9 days after the date of enactment of this 10 subsection, the Secretary shall issue guid- 11 ance on criteria to be considered for pur- 12 poses of determining under clause (i) 13 whether or not the Secretary is successful 14 in obtaining a reasonable price for a cov- 15 ered part D drug. Such criteria shall in- 16 clude at least the following: 17 ‘‘(I) The comparative clinical ef- 18 fectiveness and cost effectiveness, if 19 available, of such covered part D 20 drug. 21 ‘‘(II) The budgetary impact of 22 providing coverage under this part for 23 such covered part D drug. 24 VerDate Sep 11 2014 23:19 Apr 12, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S908.IS S908 pbinns on DSKJLVW7X2PROD with BILLS 6 •S 908 IS ‘‘(III) The number of similarly 1 effective drug or alternative treatment 2 regimens for each approved use of 3 such covered part D drug. 4 ‘‘(IV) Associated unmet need or 5 severity of illness. 6 ‘‘(C) IDENTIFICATION OF COVERED PART 7 D DRUGS SUBJECT TO NEGOTIATION AND AP- 8 PLICATION OF NEGOTIATED PRICE.— 9 ‘‘(i) IDENTIFICATION.—The Secretary 10 shall, for each plan year, in accordance 11 with the subsequent clauses of this sub- 12 paragraph, and pursuant to rulemaking, 13 identify covered part D drugs for which ne- 14 gotiations under subparagraph (A) shall be 15 conducted. 16 ‘‘(ii) APPLICATION OF NEGOTIATED 17 PRICE.—Except as provided in clause (iii), 18 the negotiated price of a covered Part D 19 drug shall be in effect for each subsequent 20 plan year, and may be adjusted for infla- 21 tion, as measured by the percentage in- 22 crease in the consumer price index for all 23 urban consumers over the preceding year. 24 VerDate Sep 11 2014 23:19 Apr 12, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S908.IS S908 pbinns on DSKJLVW7X2PROD with BILLS 7 •S 908 IS ‘‘(iii) PROCESS FOR RENEGOTI- 1 ATION.—The Secretary may establish a 2 process whereby stakeholders may petition 3 for the negotiated price of a covered Part 4 D to be renegotiated after an appropriate 5 length of time and only if evidence justi- 6 fying the need for such renegotiation is 7 provided. 8 ‘‘(iv) REASONABLE NOTIFICATION.— 9 The Secretary shall carry out this subpara- 10 graph in such manner as to provide for 11 public notification of the covered part D 12 drugs subject to negotiations for a plan 13 year within a reasonable period before the 14 beginning of such negotiations. 15 ‘‘(D) PRIORITIZATION OF CERTAIN COV- 16 ERED PART D DRUGS.—For purposes of sub- 17 paragraph (C)(i), the Secretary shall prioritize 18 negotiating the prices of covered part D 19 drugs— 20 ‘‘(i) that are among— 21 ‘‘(I) the 40 covered part D drugs 22 that are utilized by at least 1,000 23 Medicare part D beneficiaries and 24 with respect to which there were the 25 VerDate Sep 11 2014 23:19 Apr 12, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S908.IS S908 pbinns on DSKJLVW7X2PROD with BILLS 8 •S 908 IS highest total expenditures under this 1 part during the most recent 12-month 2 period for which data is available; 3 ‘‘(II) the 40 covered part D 4 drugs that are utilized by at least 5 1,000 Medicare part D beneficiaries 6 with respect to whom the total annual 7 spending per such a beneficiary under 8 this part for coverage of such a drug 9 is at least $10,000; or 10 ‘‘(III) the 20 covered part D 11 drugs that are utilized by at least 12 1,000 Medicare part D beneficiaries 13 and with respect to which there are 14 unit cost increases at or above the 15 95th percentile of overall covered part 16 D drug unit cost increases during the 17 most recent 12-month period for 18 which data is available; 19 ‘‘(ii) with respect to which the cost of 20 such a drug to the part D eligible indi- 21 vidual involved would exceed the annual 22 out-of-pocket threshold applicable under 23 section 1860D–2(b)(4)(B) for such plan 24 year, if the drug were prescribed to the in- 25 VerDate Sep 11 2014 23:19 Apr 12, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S908.IS S908 pbinns on DSKJLVW7X2PROD with BILLS 9 •S 908 IS dividual for the period of the year or with 1 respect to which a single treatment regi- 2 men is priced above such annual out-of- 3 pocket threshold applicable under such sec- 4 tion 1860D–2(b)(4)(B) for the year; or 5 ‘‘(iii) that are single-source drugs or 6 biologicals (as defined in section 7 1847A(c)(6)(D)) and that satisfy at least 8 one other criterion described in a previous 9 clause of this subparagraph. 10 ‘‘(E) ANNUAL REPORT TO CONGRESS.— 11 Not later than 30 days after the date on which 12 the Secretary completes negotiations under this 13 paragraph for the first plan year and each sub- 14 sequent plan year, the Secretary shall submit to 15 Congress and make available to the public a re- 16 port describing the negotiations during the pre- 17 ceding year, including— 18 ‘‘(i) the number of covered part D 19 drug prices negotiated; 20 ‘‘(ii) the magnitude of savings 21 achieved as a result of such negotiations; 22 ‘‘(iii) the number of times price nego- 23 tiations failed (based on the criteria in- 24 cluded in the guidance issued pursuant to 25 VerDate Sep 11 2014 23:19 Apr 12, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S908.IS S908 pbinns on DSKJLVW7X2PROD with BILLS 10 •S 908 IS clause (iii) of subparagraph (B)) and re- 1 sulted in the use of fallback prices under 2 clause (i) of such subparagraph, and the 3 rationale for any such decisions; 4 ‘‘(iv) the progress made toward nego- 5 tiating the prices of covered part D drugs 6 that are prioritized under subparagraph 7 (D); and 8 ‘‘(v) the barriers, if any, to achieving 9 savings through negotiations. 10 ‘‘(F) EVALUATION.—Not later than De- 11 cember 31, 2026, the Inspector General of the 12 Department of Health and Human Services 13 shall submit to Congress a report evaluating the 14 negotiations conducted by the Secretary under 15 this paragraph, including a description and 16 analysis of— 17 ‘‘(i) the extent to which such price ne- 18 gotiations are achieving lower prices for 19 covered part D drugs for enrollees; 20 ‘‘(ii) the parties benefitting from such 21 lower prices, such as enrollees, the Federal 22 Government, States, prescription drug 23 plans and MA–PD plans, or other entities; 24 VerDate Sep 11 2014 23:19 Apr 12, 2021 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S908.IS S908 pbinns on DSKJLVW7X2PROD with BILLS 11 •S 908 IS ‘‘(iii) how such price negotiations are 1 affecting— 2 ‘‘(I) the list price of covered part 3 D drugs; and 4 ‘‘(II) drug prices in the private 5 market; and 6 ‘‘(iv) recommendations for improving 7 price negotiations, if applicable. 8 ‘‘(2) ESTABLISHMENT AND APPLICATION OF 9 FORMULARY BY THE SECRETARY OR CHANGES IN 10 FORMULARIES TO BE REQUIRED BY SECRETARY.— 11 ‘‘(A) IN GENERAL.—The Secretary shall, 12 for plan years beginning with plan year 2023— 13 ‘‘(i) subject to subparagraphs (B) and 14 (C), establish and apply a formulary for 15 required use by sponsors of prescription 16 drug plans and organizations offering MA– 17 PD plans under this part; or 18 ‘‘(ii) require changes, as necessary, in 19 the covered part D drugs included on 20 formularies of PDP sponsors of prescrip- 21 tion drug plans (including changes, as nec- 22 essary, in the preferred or tiered cost-shar- 23 ing status of such a drug) to take into ac- 24 count negotiations carried out by the Sec- 25 VerDate Sep 11 2014 23:19 Apr 12, 2021 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S908.IS S908 pbinns on DSKJLVW7X2PROD with BILLS 12 •S 908 IS retary pursuant to paragraph (1), regard- 1 less of whether such a covered part D drug 2 is the subject of such negotiations. 3 ‘‘(B) REQUIRED INCLUSION OF DRUGS IN 4 ALL THERAPEUTIC CATEGORIES.—A formulary 5 established and applied under subparagraph 6 (A)(i) shall include at least two covered part D 7 drugs in each category and class of covered part 8 D drugs as described in section 9 423.120(b)(2)(i) of title 42, Code of Federal 10 Regulations (as in effect on January 1, 2019). 11 ‘‘(C) APPLICATION OF DEVELOPMENT AND 12 REVISION REQUIREMENTS AND REQUIRED IN- 13 CLUSION OF ALL DRUGS IN CERTAIN CAT- 14 EGORIES AND CLASSES.—The requirements de- 15 scribed in subparagraphs (A) and (B) of section 16 1860D–4(b)(3) (relating to development and re- 17 vision requirements of the formulary) and sub- 18 paragraph (G) of such section (relating to re- 19 quired inclusion of all drugs in certain cat- 20 egories and classes) shall apply to a formulary 21 established and applied under subparagraph 22 (A)(i) of this paragraph. 23 ‘‘(3) PLAN FLEXIBILITY TO NEGOTIATE GREAT- 24 ER DISCOUNTS.—Nothing in this subsection shall be 25 VerDate Sep 11 2014 23:19 Apr 12, 2021 Jkt 019200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S908.IS S908 pbinns on DSKJLVW7X2PROD with BILLS 13 •S 908 IS construed as preventing the sponsor of a prescrip- 1 tion drug plan, or an organization offering an MA– 2 PD plan, from obtaining a discount or reduction of 3 the price for a covered part D drug below the price 4 negotiated under paragraph (1), if applicable, in- 5 cluding through the use of preferred or tiered cost- 6 sharing status. 7 ‘‘(4) ENSURING BENEFICIARY ACCESS TO 8 NEEDED DRUGS.—Beginning with plan year 2023, 9 each PDP sponsor of a prescription drug plan and 10 organization offering an MA–PD plan shall have in 11 place a process under which an enrollee in the plan 12 may request coverage under the plan for a covered 13 part D drug that is not on the formulary, or is sub- 14 ject to utilization management controls, such as 15 tiered pricing, prior authorization, or step therapy.’’. 16 (b) CONFORMING AMENDMENTS.— 17 (1) IN GENERAL.—Section 1860D–4 of the So- 18 cial Security [Text truncated for display. Full text available on Congress.gov.]