Medicare Drug Price Negotiation Act

II 116TH CONGRESS 1ST SESSION S. 99 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 JANUARY 10, 2019 Mr. SANDERS (for himself, Mr. BOOKER, Mrs. GILLIBRAND, Ms. HARRIS, Mr. LEAHY, Mr. REED, Ms. SMITH, and Ms. WARREN) introduced the fol- lowing bill; which was read twice and referred to the Committee on Fi- nance 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 02:19 Jan 17, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S99.IS S99 kjohnson on DSK79L0C42 with BILLS 2 •S 99 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, with respect to an ap- 16 plicable period (as defined in subparagraph 17 (H))— 18 ‘‘(i) during the negotiation year (as 19 defined in such subparagraph) for such pe- 20 riod, negotiate with pharmaceutical manu- 21 facturers the prices (including discounts, 22 rebates, and all other price concessions) 23 that may be charged to PDP sponsors and 24 MA organizations for applicable covered 25 part D drugs (as defined in such subpara- 26 VerDate Sep 11 2014 02:19 Jan 17, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S99.IS S99 kjohnson on DSK79L0C42 with BILLS 3 •S 99 IS graph) furnished to enrollees during such 1 period; and 2 ‘‘(ii) complete such negotiations not 3 less than 30 days before the first day of 4 the application review process for the first 5 plan year during the applicable period for 6 new contracts or expanding existing con- 7 tracts with PDP sponsors and MA organi- 8 zations to offer prescription drug plans or 9 MA–PD plans, respectively. 10 ‘‘(B) USE OF FALLBACK IF NEGOTIATIONS 11 FAIL.— 12 ‘‘(i) IN GENERAL.—If, after negotia- 13 tions under subparagraph (A) with respect 14 to an applicable period, the Secretary is 15 not successful in obtaining an appropriate 16 price for applicable covered part D drugs 17 in accordance with clause (ii), the price 18 that may be charged to PDP sponsors and 19 MA organizations for applicable covered 20 part D drugs furnished to enrollees during 21 such period shall be the lowest of the fol- 22 lowing: 23 ‘‘(I) The contract price applied 24 pursuant to section 8126 of title 38, 25 VerDate Sep 11 2014 02:19 Jan 17, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S99.IS S99 kjohnson on DSK79L0C42 with BILLS 4 •S 99 IS United States Code, for such drug for 1 the contract year (as defined in such 2 section 8126). 3 ‘‘(II) The average of the prices 4 available, during the most recent 12- 5 month period for which data is avail- 6 able from the manufacturer to any 7 wholesaler, retailer, provider, health 8 maintenance organization, nonprofit 9 entity, or governmental entity in Can- 10 ada, the United Kingdom, Germany, 11 France, and Japan. 12 ‘‘(III) The best price determined 13 under section 1927(c)(1)(C) for such 14 drug for the most recent rebate period 15 (as defined in section 1927(k)(8)) ap- 16 plicable to such first plan year of the 17 applicable period. 18 ‘‘(ii) GUIDANCE.—Not later than 6 19 months before the Secretary begins nego- 20 tiations under subparagraph (A) with re- 21 spect to the first applicable period, the 22 Secretary shall issue guidance on criteria 23 to be considered for purposes of deter- 24 mining under clause (i) whether or not the 25 VerDate Sep 11 2014 02:19 Jan 17, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S99.IS S99 kjohnson on DSK79L0C42 with BILLS 5 •S 99 IS Secretary is successful in obtaining an ap- 1 propriate price for an applicable covered 2 part D drug. Such criteria shall include at 3 least the following: 4 ‘‘(I) The comparative clinical ef- 5 fectiveness and cost effectiveness, if 6 available, of such covered part D 7 drug. 8 ‘‘(II) The budgetary impact of 9 providing coverage under this part for 10 such covered part D drug. 11 ‘‘(III) The number of similarly 12 effective drug or alternative treatment 13 regimens for each approved use of 14 such covered part D drug. 15 ‘‘(IV) Associated unmet need or 16 severity of illness. 17 ‘‘(C) IDENTIFICATION OF APPLICABLE 18 COVERED PART D DRUGS.— 19 ‘‘(i) IN GENERAL.—The Secretary 20 shall, for each applicable period, in accord- 21 ance with the subsequent clauses of this 22 subparagraph, and pursuant to rule- 23 making, identify applicable covered part D 24 drugs for which negotiations under sub- 25 VerDate Sep 11 2014 02:19 Jan 17, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S99.IS S99 kjohnson on DSK79L0C42 with BILLS 6 •S 99 IS paragraph (A) shall be conducted during 1 the negotiation year for such period. In 2 this paragraph, all such covered part D 3 drugs so identified for an applicable period 4 are collectively referred to as applicable 5 covered part D drugs with respect to such 6 period. 7 ‘‘(ii) IDENTIFICATION OF PRIORITIZED 8 DRUGS.—In carrying out clause (i), except 9 as provided under clause (iii), the Sec- 10 retary may not identify a covered part D 11 drug that is not a drug prioritized pursu- 12 ant to subparagraph (D) as an applicable 13 covered part D drug until all covered part 14 D drugs that are so prioritized have been 15 identified as an applicable covered part D 16 drug for the applicable period or for a pre- 17 vious applicable period for which the nego- 18 tiated price of such drug has not expired. 19 ‘‘(iii) DRUG INCLUSIONS FOR PRICE 20 RENEGOTIATIONS.—In the case of a cov- 21 ered part D drug that is identified as an 22 applicable covered part D drug for an ap- 23 plicable period, such covered part D drug 24 shall be identified as an applicable covered 25 VerDate Sep 11 2014 02:19 Jan 17, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S99.IS S99 kjohnson on DSK79L0C42 with BILLS 7 •S 99 IS part D drug for each subsequent third ne- 1 gotiation year. 2 ‘‘(iv) REASONABLE NOTIFICATION.— 3 The Secretary shall carry out this subpara- 4 graph in such manner as to provide for 5 public notification of applicable covered 6 part D drugs for the applicable period 7 within a reasonable period before the be- 8 ginning of the negotiation year for such 9 period. 10 ‘‘(D) PRIORITIZATION OF CERTAIN COV- 11 ERED PART D DRUGS.—For purposes of sub- 12 paragraph (C)(ii), the Secretary shall prioritize 13 covered part D drugs— 14 ‘‘(i) that are among— 15 ‘‘(I) the 40 covered part D drugs 16 that are utilized by at least 1,000 17 Medicare part D beneficiaries and 18 with respect to which there were the 19 highest total expenditures under this 20 part during the most recent 12-month 21 period for which data is available; 22 ‘‘(II) the 40 covered part D 23 drugs that are utilized by at least 24 1,000 Medicare part D beneficiaries 25 VerDate Sep 11 2014 02:19 Jan 17, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S99.IS S99 kjohnson on DSK79L0C42 with BILLS 8 •S 99 IS with respect to whom the total annual 1 spending per such a beneficiary under 2 this part for coverage of such a drug 3 is at least $10,000; or 4 ‘‘(III) the 20 covered part D 5 drugs that are utilized by at least 6 1,000 Medicare part D beneficiaries 7 and with respect to which there are 8 unit cost increases at or above the 9 95th percentile of overall covered part 10 D drug unit cost increases during the 11 most recent 12-month period prior to 12 the beginning of such negotiation year 13 for which data is available; 14 ‘‘(ii) with respect to which the cost of 15 such a drug to the part D eligible indi- 16 vidual involved would exceed the annual 17 out-of-pocket threshold applicable under 18 section 1860D–2(b)(4)(B) for such nego- 19 tiation year, if the drug were prescribed to 20 the individual for the period of the year or 21 with respect to which a single treatment 22 regimen is priced above such annual out- 23 of-pocket threshold applicable under such 24 section 1860D–2(b)(4)(B) for the year; or 25 VerDate Sep 11 2014 02:19 Jan 17, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S99.IS S99 kjohnson on DSK79L0C42 with BILLS 9 •S 99 IS ‘‘(iii) that are single-source drugs or 1 biologicals (as defined in section 2 1847A(c)(6)(D)) and that satisfy at least 3 one other criterion described in a previous 4 clause of this subparagraph. 5 ‘‘(E) ANNUAL REPORT TO CONGRESS.— 6 Not later than 30 days after the date on which 7 the Secretary completes negotiations under this 8 paragraph for the first negotiation year and 9 each year thereafter, the Secretary shall submit 10 to Congress and make available to the public a 11 report describing the negotiations during the 12 preceding negotiation year, including— 13 ‘‘(i) the number of applicable covered 14 part D drug prices negotiated; 15 ‘‘(ii) the magnitude of savings 16 achieved as a result of such negotiations; 17 ‘‘(iii) the number of times price nego- 18 tiations failed (based on the criteria in- 19 cluded in the guidance issued pursuant to 20 clause (ii) of subparagraph (B)) and re- 21 sulted in the use of fallback prices under 22 clause (i) of such subparagraph, and the 23 rationale for any such decisions; 24 VerDate Sep 11 2014 02:19 Jan 17, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S99.IS S99 kjohnson on DSK79L0C42 with BILLS 10 •S 99 IS ‘‘(iv) the progress made toward nego- 1 tiating the prices of covered part D drugs 2 that are prioritized under subparagraph 3 (D); and 4 ‘‘(v) the barriers, if any, to achieving 5 savings through negotiations. 6 ‘‘(F) GAO REPORT.—Not later than De- 7 cember 31, 2024, the Comptroller General of 8 the United States shall submit to Congress a 9 report on the negotiations conducted by the 10 Secretary under this paragraph, including a de- 11 scription and analysis of— 12 ‘‘(i) the extent to which such price ne- 13 gotiations are achieving lower prices for 14 covered part D drugs for enrollees; 15 ‘‘(ii) the parties benefitting from such 16 lower prices, such as enrollees, the Federal 17 Government, States, prescription drug 18 plans and MA–PD plans, or other entities; 19 ‘‘(iii) how such price negotiations are 20 affecting— 21 ‘‘(I) the list price of covered part 22 D drugs; and 23 ‘‘(II) drug prices in the private 24 market; and 25 VerDate Sep 11 2014 02:32 Jan 18, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S99.IS S99 kjohnson on DSK79L0C42 with BILLS 11 •S 99 IS ‘‘(iv) recommendations for improving 1 price negotiations, if applicable. 2 ‘‘(G) DEFINITIONS.—For purposes of this 3 paragraph: 4 ‘‘(i) APPLICABLE COVERED PART D 5 DRUGS.—The term ‘applicable covered part 6 D drugs’ means, for an applicable period, 7 covered part D drugs identified by the Sec- 8 retary under subparagraph (C) for such 9 period. 10 ‘‘(ii) APPLICABLE PERIOD.—The term 11 ‘applicable period’ means, with respect to a 12 negotiation year and applicable covered 13 part D drugs, the 3-plan year period be- 14 ginning with the first plan year beginning 15 after the negotiation year for such covered 16 part D drugs. 17 ‘‘(iii) NEGOTIATION YEAR.—The term 18 ‘negotiation year’ means, with respect to 19 an applicable period, a plan year, begin- 20 ning with 2020, prior to the first plan year 21 of the applicable period. 22 ‘‘(2) ESTABLISHMENT AND APPLICATION OF 23 FORMULARY BY THE SECRETARY OR CHANGES IN 24 FORMULARIES TO BE REQUIRED BY SECRETARY.— 25 VerDate Sep 11 2014 02:19 Jan 17, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S99.IS S99 kjohnson on DSK79L0C42 with BILLS 12 •S 99 IS ‘‘(A) IN GENERAL.—The Secretary shall, 1 for plan years beginning with plan year 2020— 2 ‘‘(i) subject to subparagraphs (B) and 3 (C), establish and apply a formulary for 4 required use by sponsors of prescription 5 drug plans and organizations offering MA– 6 PD plans under this part; or 7 ‘‘(ii) require changes, as necessary, in 8 the covered part D drugs included on 9 formularies of PDP sponsors of prescrip- 10 tion drug plans (including changes, as nec- 11 essary, in the preferred or tiered cost-shar- 12 ing status of such a drug) to take into ac- 13 count negotiations carried out by the Sec- 14 retary pursuant to paragraph (1), regard- 15 less of whether such a covered part D drug 16 is the subject of such negotiations. 17 ‘‘(B) REQUIRED INCLUSION OF DRUGS IN 18 ALL THERAPEUTIC CATEGORIES.—A formulary 19 established and applied under subparagraph 20 (A)(i) shall include at least two covered part D 21 drugs in each category and class of covered part 22 D drugs as described in section 23 423.120(b)(2)(i) of title 42, Code of Federal 24 Regulations (as in effect on January 1, 2017). 25 VerDate Sep 11 2014 02:19 Jan 17, 2019 Jkt 089200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S99.IS S99 kjohnson on DSK79L0C42 with BILLS 13 •S 99 IS ‘‘(C) APPLICATION OF DEVELOPMENT AND 1 REVISION REQUIREMENTS AND REQUIRED IN- 2 CLUSION OF ALL DRUGS IN CERTAIN CAT- 3 EGORIES AND CLASSES.—The requirements de- 4 scribed in subparagraphs (A) and (B) of section 5 1860D–4(b)(3) (relating to development and re- 6 vision requirements of the formulary) and sub- 7 paragraph (G) of such section (relating to re- 8 quired inclusion of all drugs in certain cat- 9 egories and classes) shall apply to a formulary 10 established and applied under subparagraph 11 (A)(i) of this paragraph. 12 ‘‘(3) PLAN FLEXIBILITY TO NEGOTIATE GREAT- 13 ER DISCOUNTS.—Nothing in this subsection shall be 14 construed as preventing the sponsor of a prescrip- 15 tion drug plan, or an organization offering an MA [Text truncated for display. 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