Rep. Kurt Schrader Explains His Drug Pricing Plan

Rep. Schrader Landscape Image.jpeg

After gaining control of the White House and Congress in last year’s elections, Democrats appeared poised to deliver on their decades-long promise of negotiating drug prices for Medicare. 

But that effort is in jeopardy amid high-stakes negotiations in Congress that will determine if Democrats can pass an infrastructure bill and the Build Back Better multi-trillion social spending package. 

U.S. Rep. Kurt Schrader, D-Oregon, has played a key role in shaping what drug pricing controls might look like. Last month, he voted on the House Energy and Commerce Committee to remove a drug-pricing provision, favored by many Democrats, from Build Back Better. 

The provision mirrors H.R. 3, which passed the House in 2019. It would direct the federal government to negotiate prices of drugs covered by Medicare Part D, which covers 3,500 medications, and set price caps for private insurance. 

Schrader voted for H.R. 3, but he said it’s now effectively dead. He said it has no chance of passing the closely divided Senate and would have unintended consequences for drug innovation. 

Schrader and U.S. Rep. Scott Peters, D-California, have introduced a bill that would negotiate for Medicare Part B, which covers fewer drugs that also tend to be more expensive, while placing price caps on medications. 

While Schrader’s position has rankled those in his own party, he said his bill is stronger in some ways than H.R. 3. 

The Lund Report spoke with Schrader about what he’s hearing amid negotiations, how his bill stacks up against H.R. 3 and what lines have been drawn in the sand. The interview has been edited for clarity and brevity. 

The Lund Report: I read in the The New York Times where Sen. Ron Wyden said that it’s time for Democrats to deliver. Are you getting a clear message from the Senate on what delivery means? 

U.S. Rep. Kurt Schrader: (Pause.) No. 

There seems to be a little bit of mixed messages. And I think we’ve got to get it right. I do agree it’s time to try and deliver good products.

We’re trying to figure out how much can we afford. We’ve already spent $5 trillion in the last year-and-a-half fighting COVID. What else do we have to do, not what we want to do? And I think there’s not consensus yet on what that is in the Senate. We’re making progress, I’ll tell you that. 

The Lund Report: As far as getting some drug-pricing control, what do you think delivery looks like on that?

Schrader: For the first time, we are now actually engaged in realistic discussions. 

There’s general consensus among all parties, that H.R. 3 is definitely not the way we’re going to go. And discussions between the White House, various senators, folks like myself and others that have spent a lot of time on this issue or are now going on in a very productive way.

Hopefully, over the next few weeks, we’ll get to a spot where the drug-pricing negotiations are included, albeit at a more thoughtful, non-innovation threatening way that (Rep. Scott Peters, D-California) and I put out.

The Lund Report: What makes you say H.R. 3 is not going to be the vehicle?

Schrader: It doesn’t have a chance of passing the Senate. (Sen. Bob Menendez, D-New Jersey,) has said that for months, and he said it again last week, and all of a sudden everyone picks it up. And there are other senators that are not going to do that, so it’s time to move on. 

There’s a lot of good stuff in H.R.3, and it forms a lot of the basis of our bill. 

What we’re trying to do is come up with a product that by consensus has the chance of passing. It’s that threading of the needle that can get us to doing something that all Americans want, certainly myself.

It’s not just drug companies. That’s something that is missing in H.R 3. In our bill, we talk about the pharmacy benefit managers, we talk about the insurance companies. Everyone has a role in the cost of pharmaceuticals, so I think everyone has to be at the table and give a little bit so that seniors and those folks that can least afford these life-saving medications can still get them in an affordable manner.

The Lund Report: Have you had senators say that they’ll sign on to your bill or they would vote for it? Or some version of it?

Schrader: Absolutely not. What we’re looking at are some of the elements that we have in our bill that are much, much better in terms of the path they’d like to go on. The Senate, just like the House, can be fiercely independent.

Our out-of-pocket tiered approach, I think, has a lot of cachet. The inflationary rebate stuff, I think, has a lot of cachet. People really liked the transparency pieces because ours updated H.R. 3 from two years ago.

H.R. 3 would really be pretty draconian. It’s really not negotiation. I don’t think there’s an appetite to just adopt some European model here in the United States.

The Lund Report: What are you hearing from the White House, and what is your sense of the Biden administration’s bottom line regarding whether Part D negotiations need to become law?

Schrader: I think they’re willing to negotiate with House and Senate members. And I respectfully point out that the president has been a long-serving senator, and it is Congress’ job to write the laws as long as we get to the general principles that the president and others want to have.

I think we’re working in good faith. I don’t think the administration, at least where I stand, has a line in the sand. I don’t think there’s many lines in the sand on the Senate or House side, other than not H.R. 3. 

The Lund Report: How much of H.R. 3 is in your bill? How similar is it, if at all?

Schrader: Quite a bit of it is embraced. The idea that we have out-of-pocket-caps that are affordable, I think our bill is better than H.R. 3, but it is similar. I think the inflation rebates are very similar. Our bill goes well beyond H.R. 3 in attacking the problems with biosimilars, drug companies sitting on applications and not developing them. Our bill really targets insulin in a big way to make sure those prices are affordable for folks. 

Drug-price negotiations is a very similar feature between H.R. 3 and our bill. The types of drugs, and how many drugs and the exclusivity periods, those are the areas that we’re trying to negotiate and figure out.

The Lund Report: As far as conversations with drug manufacturing companies, what do they think of this bill? What kind of feedback have you gotten from them?

Schrader: I haven’t talked to a lot of them in a long time. But they’re obviously not excited about any of this. They’re not going to endorse the Schrader-Peters bill because it’s pretty tough on them also. 

But I do hear, in a positive way, they want to be part of the solution. They understand that the time has come. It’s been something like 20 years have passed since the passage of Medicare Part D, and drugs are more expensive. 

So I think they’re very interested and don’t mind being part of the out-of-pocket equation and paying some of that, instead of seniors, instead of the taxpayer. We’re going to have the manufacturers step up and pay at least their fair share. What this is, I guess, is open to debate. 

The stifling of their innovation, that’s one piece that they’re very concerned about. I take it with a grain of salt, obviously, when it comes from them. But when the Congressional Budget Office, which doesn’t have an axe to grind, says, “It’s definitely going to be an inhibitory situation if we use the international price index” — that gets my attention.

That’s what got Rep. Peters and I to try and come up with an alternate plan that would allow that innovation and exclusivity period and then go after folks when they try and game the system. It’s hard for the pharmaceutical companies to argue against that. 

The Lund Report: The CBO analysis of H.R. 3 seemed to suggest that there would be a fairly small number of fewer drugs to be brought to market. And the analysis itself said it would be it was really uncertain about exactly what would happen if there were price negotiations for Medicare Part D. What makes you so certain that there would be less innovation if there were price negotiations for Medicare Part D?

Schrader: I’m not certain. There would be some. CBO does say some. I don’t know what the magic number is. And CBO doesn’t pretend it has a bead on the exact number.

But I know there are 50 patient groups out there from a bunch of rare disease advocates that are very concerned about stifling that innovation in any way shape or form. 

That’s why Rep. Peters and I take this alternate approach. We go after the most expensive drugs in Part B that really would save seniors and those most vulnerable people the most money. So let’s do that first. We’ll learn from that and maybe down the line there’s an opportunity to do some other things.

The Lund Report: A lot of this conversation has been about Medicare drug pricing. But what about people outside of Medicare? What needs to be done to drive down prices for people outside of Medicare?

Schrader: The Medicaid population, they already can negotiate their prices. So that’s not an issue to commercial markets out there. Rather than the heavy-handed approach that’s taken on H.R. 3, the clear history of the commercial market is they usually follow what we end up doing with Medicare. 

There was this big discussion that we have to do the individual mandate for the Affordable Care Act or no one’s going to get health insurance. That was complete bullshit. We don’t have a penalty right now, and applications are up with good outreach.

Let’s just do the Medicare stuff. People will follow, insurance companies will follow and at the end of the day, everyone will be benefiting from lower drug costs.

You can reach Jake Thomas at [email protected].

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