How Democrats can still cut prescription drug prices

Democrats in Congress are closing in on a deal to enact major parts of the party’s economic and social agenda. Missing from the deal’s framework, however, is any new authority to tackle high prescription drug costs. As The Hill reports:

“The framework of a deal on President Biden’s social spending package unveiled on Thursday does not include allowing Medicare to negotiate lower prescription drug prices, leaving out a major Democratic priority. [ ] A senior administration official told reporters there were not enough votes among Democrats to pass the policy. [. . .] Sen. Kyrsten Sinema (D-Ariz.), as well as a small handful of House Democrats, were seen as obstacles to passing the policy.”

This would be a major missed opportunity. Brand-name drugs that are protected from market competition constitute just 10 percent of all prescriptions, but account for 80 percent of all drug spending in the United States. Letting Medicare negotiate with pharmaceutical companies was a major plank in President Biden’s campaign platform, and is one of the Democratic Party’s most popular policy ideas. It’s a reform that is particularly important to congressional Democrats in hard-won competitive districts.

House progressives are reportedly still discussing ways to incorporate drug-price reforms into the final bill. One fallback option they should keep on the table is a negotiated compromise that works around Sinema and the pharma-friendly House holdouts. Because laws already on the books allow the Biden administration to leverage the government’s power over drug patents into reduced drug prices for Medicare and other government programs, it doesn’t actually need additional authority in the Build Back Better bill to undertake drug negotiations. Congressional Democrats simply need to wield their negotiating power to compel the administration to use the power it already has. And they can do that by taking a page out of the moderate playbook from the Obama years.

The Stupak deal

Back in 2009–2010 during the negotiations around the Affordable Care Act, a small group of pro-life congressional Democrats were concerned that the law would lead to federal funding of abortion. Even though the Hyde Amendment already restricts most federal funding for abortion, these Democrats — led by Rep. Bart Stupak of Michigan — wanted additional language included in the ACA reiterating that none of its funds would be used to cover abortion care.

Stupak’s anti-abortion amendment made it into the health reform bill passed by the House in late 2009, but was not included in the Senate’s bill. The pro-life bloc of House Democrats threatened to vote down the final healthcare bill if it didn’t include strengthened language against abortion. But other congressional Democrats objected to that language, and there was concern that Stupak’s amendment wasn’t eligible for inclusion in the budget reconciliation process (which became the Democrats’ only path for health reform following Republican Scott Brown’s special-election victory for Ted Kennedy’s former Senate seat).

Facing potential derailment of health reform over the abortion issue, the White House stepped in and negotiated a compromise with Stupak. In exchange for the bloc’s voting to pass the ACA, President Obama agreed to issue an executive order reiterating that funding under the ACA would not go to fund abortion. Obama released the text of the pending executive order on the same day that the House voted to pass the ACA, and signed the order — with Stupak in attendance — three days later.

The upshot of this deal was that pro-choice Democrats were protected from voting in support of aggressive anti-abortion language, while pro-life Democrats won executive assurance from the White House — albeit an assurance with less force than permanent legislation.

A Stupak-style prescription drug deal?

The Biden administration right now has the power to take executive action to protect Americans from unaffordable prices charged by pharmaceutical companies for prescription drugs. An old law (known as Section 1498) gives the government immense power to use or manufacture products for which it has granted a patent — including prescription drugs — in exchange for reasonable compensation. That gives the government leverage to negotiate steep discounts from pharmaceutical companies that don’t want to have their drug patents eviscerated. The New York Times editorial board approvingly called this “eminent domain for drugs,” recognizing that “the ​​government [could] use[] the prospect of 1498 to get drug makers to the negotiating table[.]”

Another law, the Bayh-Dole Act, gives the government the power to “march in” to make publicly-funded patented drugs widely available when pharmaceutical companies have refused to make drugs available on reasonable terms. That too gives the government a mechanism to compel reduced drug prices.

Congressional Democrats could follow the model of the Obama-Stupak deal during the ACA negotiations to insist that the Biden administration wield its preexisting authority to curb high drug prices. Even if there are not enough votes in Congress to use legislation to mandate that Medicare negotiate drug prices, a decisive bloc of House members could insist on an equivalent executive order as a second-best, compromise outcome. In 2010, the Stupak bloc was only about a dozen House members; certainly many more congressional Democrats — indeed, nearly all of them — favor drug negotiations today.

This executive order could direct the relevant federal agencies (Health & Human Services, the National Institutes for Health, the Centers for Medicare & Medicaid Services, etc.) to develop procedures for reducing prescription drug prices by using Section 1498, the Bayh-Dole Act, and any other pertinent authority on the books. Call it the “Executive Order on Combating Prescription Drug Inflation And Price-Gouging.” The administration already has the tools to cut drug prices — it just has to be made to use them.

Of course, it’s possible that Sinema and the pharma-friendly House Democrats will rebel against this deal. But President Biden ran on a pledge to negotiate drug prices through Medicare and to “put a stop to runaway drug prices and the profiteering of the drug industry.” And he can do that with or without a new legislative mandate from Congress. Nevertheless, the vast majority of congressional Democrats support cracking down on outrageous drug prices, and they ought to at least exact a promise that the administration is serious about using its power to protect Americans from ransom profiteering by the drug industry.