Democrats had a neat plan for their health care agenda. As part of the $3.5 trillion spending bill they’re putting together as I type, they would finally, after years and years of pledges to do so, pass legislation to cut the costs of prescription drugs. This would have two wonderful benefits for the Democrats. First, the obvious: They would fulfill a campaign promise to cut the costs of prescription drugs. Fulfilling popular promises is good! Second, the Medicare drug negotiations—price negotiations between the government and pharmaceutical companies— would save the government hundreds of billions of dollars that Democrats could then use to pay for the rest of their health agenda: covering new services under Medicare, bringing the ACA’s Medicaid expansion to all 50 states, and making permanent the improvements Democrats made to Obamacare’s insurance exchanges in their COVID relief bill earlier this year.
Again, a neat plan on paper. In terms of actually shepherding this idea through Congress, though, there was always one problem that tended to be overlooked: Doing this would require punching the pharmaceutical industry, and its powerful lobby, squarely in the jaw. There’s a big reason such a popular idea—let the government negotiate drug prices!—hadn’t happened already, namely that the pharmaceutical sector wouldn’t take kindly to the threat of losing $500 billion. And now, they haven’t. Which means that, even in the early stages of Democrats in Congress trying to cobble together the Build Back Better Act, the plan is in deep trouble.
This week, the Energy and Commerce Committee met to discuss drug pricing. The legislation that House Democrats wanted to pass has an aggressive mechanism for making sure drug manufacturers complied with negotiated prices. And if they didn’t, the government would slap the companies with an escalating tax that would ultimately reach 95 percent of sales. The criticism from pharmaceutical companies, then, was that this wasn’t much of a negotiation at all, but instead the government setting rates at gunpoint. They further explained, as they often do, that these funds would severely hamper pharmaceutical innovation.
Their lobbying efforts got somewhere. Three moderate members of the committee—California Rep. Scott Peters, Oregon Rep. Kurt Schrader, and New York Rep. Kathleen Rice—announced that even though they had voted for this idea in 2019, they had since changed their minds, and now had grave concerns about pharmaceutical innovation. (It is also worth noting that Peters, in particular, has accumulated sizable donations from the pharmaceutical industry this year.)
The three members held strong, and all three voted against the drug-pricing proposal in a Wednesday committee vote. That was just enough to create a tie, and the drug-pricing plan failed to advance. PhRMA, the pharmaceutical lobby, crowed in a statement afterward that “the House markups on health care demonstrate there are real concerns with Speaker Pelosi’s extreme drug pricing plan and those concerns are shared by thoughtful lawmakers on both sides of the aisle.” (And themselves, they left out.)
Just because the drug plan couldn’t get out of that committee on Wednesday doesn’t technically mean it’s dead. The Ways and Means Committee, which also has health care jurisdiction, also considered drug-pricing on Wednesday and passed its slice of things. And the House Rules Committee, the last stop for legislation before it reaches the floor for a vote and an effective extension of the Speaker’s power, could always vote to add the provision later on.
“Polling consistently shows immense bipartisan support for Democrats’ drug price negotiation legislation, including overwhelming majorities of Republicans and independents who are fed up with Big Pharma charging Americans so much more than they charge for the same medicines overseas,” Henry Connelly, a Pelosi spokesman, said Wednesday after the committee vote. “Delivering lower drug costs is a top priority of the American people and will remain a cornerstone of the Build Back Better Act as work continues between the House, Senate and White House on the final bill.”
The broader problem, though, is that the drug-pricing plan simply may not have the votes to make it into law. Democrats can only afford to lose three votes on the Build Back Better Act when it reaches the House floor—they can’t lose any in the Senate—and this provision lost three votes in just one committee. There will likely be some drug-price negotiation provision in the final package. But the less aggressive it is, the less it will reduce the cost of prescription drugs, and the less cash Democrats will have freed up to cover the remainder of their agenda. And as long as moderates are demanding the whole package be paid for, that’s a problem.
This is the most alarming episode in a week where the swamp has begun to disrupt Democrats’ best-laid plans. House Democrats on the Ways and Means Committee could not find a way, in their menu of tax increase options, to eliminate a loophole that gives private equity and hedge fund managers a fat tax break, and which President Obama, Trump, and Biden have all called to get rid of. That committee also dropped Biden’s plan to tax unrealized capital gains at death. Democrats’ vision for the most ambitious remaking of the social contract since the Great Society remains largely intact, for now. But the process is starting to smell.