Senate Democrats and the Biden administration dropped plans to set drug price caps based on the amount paid in other high-income countries, during talks years ago to push through the law that empowered Medicare to negotiate down the cost of prescription medications.
A version of the idea was revived by President Trump in the executive order signed Monday, which called on the Department of Health and Human Services next month to draw up regulations to impose price restrictions tied to lower amounts paid in other developed nations, if drugmakers did not voluntarily reduce what they were charging in the U.S.
“Democrats could have done this a long time ago. They have fought like hell, for the drug companies. And they knew they were doing the wrong thing,” Mr. Trump told reporters, speaking at a White House event to announce the move.
For Democrats on Capitol Hill, this kind of approach to price controls has roots in a bill their own party successfully passed under House Speaker Nancy Pelosi in 2019.
As part of giving Medicare the ability to negotiate the price of costly drugs it covered, the bill passed by House Democrats wanted the maximum price to be tied to an average based on prices paid in Australia, Canada, France, Germany, Japan and the United Kingdom.
“We were hoping to get Trump. Trump said, ‘I want to negotiate.’ But then Republicans in Congress got to him,” said Wendell Primus, who served for nearly two decades as Pelosi’s top aide on health policy.
The bill did not make it through the Senate at the time, which was controlled by Mr. Trump’s party. After Democrats flipped control of the Senate, the idea ran into headwinds years later, as Biden aides and lawmakers tried to incorporate the measure into the Inflation Reduction Act.
Multiple Democrats involved in the talks on Capitol Hill at the time blamed a series of meetings in early 2021 with the staff from the Senate Finance Committee and party leadership for scuttling the idea.
Staff on the committee said that they were worried that moderate Democrats like then-Sen. Bob Menendez of New Jersey and Kyrsten Sinema of Arizona would not support the bill if it included the measure, Primus said. Menendez and Sinema are no longer in the Senate.
“Members did not want to have something referencing foreign countries. They wanted it to make a function of the manufacturer’s price here, what drug companies were offering to commercial insurers,” Primus said.
One former Biden White House aide involved in the talks said that there were several senators who understood that drug prices were too high, but they worried those price caps could undercut innovation from drugmakers in the U.S.
Instead, the deal struck by lawmakers and White House aides to pass the law in 2022 ultimately turned to a different formula: capping them using calculations based on the price previously paid by Medicare and a fixed discount off the list price in the private U.S. market.
“President Biden and Democrats in Congress cared about getting something done, and so there was a compromise on the table that wasn’t perfect, but it was going to make a huge amount of difference. And so that’s the law they ultimately enacted,” said Christen Linke-Young, deputy director of the White House Domestic Policy Council under Mr. Biden.
Medicare has gone on to implement the law, resulting in talks that are continuing under the current Trump administration to lower the maximum price that the federal insurance program will pay for a growing list of costly drugs.
“It’s a good thing for prescription drug costs in this country to be lower, we need to continue to work on that. And one of the ways to do that is actually put a proposal before Congress and get it enacted, so it has the force of law,” said Chiquita Brooks-LaSure, administrator of the Centers for Medicare and Medicaid Services under Mr. Biden.
Meanwhile, as the White House was working with their allies in Congress to pass the Inflation Reduction Act, the Biden administration moved to formally scrap a bid by Mr. Trump to impose caps tied to lower prices in other high-income countries using executive power during his first term.
Called the “most favored nation” model, Trump officials had directed Medicare to only reimburse hospitals and clinics for some costly drugs based on the lowest price paid for in other high-income countries.
CMS under Mr. Biden ultimately rescinded that move in 2022, after a legal fight that had blocked the proposal on the grounds that the Trump administration had unlawfully shortcutted the normal rulemaking steps to finalize the policy.
“The proposal was always pretty transparently illegal. The statute says that Medicare has to pay for prescription drugs in one particular way, and the Trump administration proposal was that we are going to ignore the statute and pay for drugs in an entirely different way. If the statute allowed that, a president before Donald Trump would have done it,” Linke-Young said.
A White House official under Mr. Trump disagreed with the accusation that their initial proposal was unlawful, arguing that the initial authority they used for the “demonstration” model in Medicare used powers that were broadly written by Democrats.
While they are not planning to go down the exact same path, the official said, saying that they “learned certain things from that first demonstration,” the Trump administration believes they “absolutely have that authority in our pocket.”
“We are confident that we have authorities within our government programs to do this. And any dispute from the Biden administration is an intentional misinterpretation of the statute for political reasons, because they are the ones that walked away,” the White House official said.
Trump administration officials have painted their second run at the “most favored nation” idea as even broader in scope than their first term, which had been limited to only some costly drugs administered by healthcare providers through Medicare Part B.
The White House official said Wednesday that they “firmly believe” they have the ability to pursue wider actions to push drugmakers to lower their prices within Medicare. They cited other authorities in the law being considered like section 402, which affords HHS powers to “develop and engage in experiments” which could affect payment rates in Medicaid as well.
Asked this week on Fox Business Network whether the president’s promise of steep drug price cuts would also extend to Medicare Part D, which covers the broad swath of prescriptions filled at drug store pharmacies, Health and Human Services Secretary Robert F. Kennedy Jr. said “they absolutely will.”
“They’ll apply to Medicare, and they’ll apply in the private market as well,” Kennedy said.
Asked Tuesday whether he supported the president’s plan, Republican Senate Majority Leader John Thune said he thought “it’ll be the subject of probably multiple lawsuits, and I think the courts will probably have something to say about it.”
