Latest Senate Democratic Reconciliation Bill Adds Back Revised Tax and Climate/Energy Provisions to Rx Pricing Measures


Late last week, Senate Majority Leader Chuck Schumer (D-NY) and Senator Joe Manchin (D-WV) announced they reached an agreement on an expanded Build Back Better/reconciliation bill. SeeInflation Reduction Act of 2022 – Text and Summaries. While the situation remains fluid, now is a good time to explain key points and timing of this major development/breakthrough.

Two weeks ago, Senator Manchin said he would only vote for a much smaller package consisting of drug pricing reform policies and an extension of the enhanced Affordable Care Act (ACA) health insurance premium subsidies for two years. But now, tax and energy policies are back in play and the enhanced ACA subsidies would be extended one additional year, to 2025.

  • The drug pricing provisions include the original $2,000 cap on beneficiary out-of-pocket costs would save nearly $290 billion over the next 10 years while the three-year extension of the enhanced premium subsidies costs roughly $65 billion. 
    • Changes from the Democrats agreement reached last November include:
      • Moves implementation back a year
      • Requires the HHS Secretary to negotiate a graduated schedule of 60 Part D and B drug prices from 2026 – 2029 (previously at the Secretary’s discretion); (see this early JulyCOA statement, expressing concern that price negotiation provisions will negatively impact specialty physician practices and their patients).
      • Marginally adjust language regarding the additional two-year window for biosimilars to launch
    • The cap on OOP costs and the extension of ACA premium subsidies would make it more affordable for patients to take their medications, thus increasing medication utilization.
    • At least minor tweaks are expected based on communications with the Senate parliamentarian.
    • Criticism of the drug pricing provisions remains from many sectors of the drug industry, including from manufactures, specialty physicians and the generic/biosimilars sector, citing anticipated impacts on revenues, new drug development and ultimately patient care.
  • The tax increases are expected to raise $740 billion by establishing a 15% minimum tax on business with at least $1 billion in revenue, changing the tax treatment of carried interest, and increased “IRS enforcement activities.” Democrats tout that the bill includes no new taxes on families making less than $400,000 and no new taxes on small businesses.
  • Roughly $370 billion would be dedicated to energy and climate policies, including reducing carbon pollution by roughly 40 percent by 2030. 
  • More than $300 billion is currently earmarked for deficit reduction. 

Senate Democrats and Republicans are awaiting word from the Senate Parliamentarian to determine whether the revised bill’s drug pricing provisions meet the Senate’s strict budget reconciliation rules (each provision must be primarily designed to implement budget, as opposed to policy, changes), with some wondering whether the penalties on drugmakers for increasing commercial prices faster than inflation; the excise tax on manufacturers who do not comply with a new price setting mechanism; and Part D copay smoothing provisions, will survive. There is even the possibility of the deal expanding to include additional funding for COVID-19 (testing, treatment, etc.) and a cap on out-of-pocket insulin costs. See the following statements from Democratic leadership on the current bill:

Majority Leader Schumer is optimistically seeking to pass the bill by as early as the end of this week and will need all 48 Democratic and 2 Independent senators to do so. Senator Kyrsten Sinema (D-AZ) has said that she will not take a position until the Parliamentarian has made her rulings, and Senator Sinema has previously expressed opposition to closing the carried interest loophole, which may complicate negotiations. If the Senate eventually passes a reconciliation bill, which is currently more expected than not, the House would then be called back into session from its August recess and vote on the bill shortly thereafter – though it is not yet certain if the House Democrats will avoid enough defections (4) and pass the bill in the House. If this timeline holds and the same language passes both chambers, President Biden would sign this bill into law in mid- to late-August, at the earliest.

We will keep you apprised as the situation develops.

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