November 05,2019

Grassley on Misinformation on Prescription Drug Price Bill

Prepared Floor Remarks by U.S. Senator Chuck Grassley of Iowa
Chairman, Senate Finance Committee
Tuesday, November 5, 2019
I’m here today to again promote common-sense entitlement reform.
In the past year, we’ve seen a flurry of drug pricing proposals.
I’m encouraged by the efforts from my colleagues here in the Senate, especially Ranking Member Wyden, my friends over in the House and the President, who has made lowering prescription drug costs one of the core principles of his administration.
I’ve paid attention to each of the pieces of legislation that have been proposed, and looked at their pros and cons closely.
However, so far there’s only one bipartisan proposal that cuts prescription drug spending, protects innovation, lowers what seniors will pay at the pharmacy counter, and includes entitlement reform.
The Prescription Drug Pricing Reduction Act of 2019, responsibly reduces Medicare part D costs.
But, as with any widely encompassing piece of legislation, there has been some spirited debate surrounding the different provisions of our bill.
I’m here today to clear up some of the confusion surrounding a phrase I’ve heard thrown around in this debate: price setting.
The scare tactic associated with the price setting claim is centered on one particular policy in our bill, matching the growth of the government subsidies that drug manufacturers receive to the rate of consumer inflation.
When I set out at the beginning of this year to create a piece of bipartisan legislation that had real and meaningful change, I knew that the focus had to be on individual Americans.
That’s why we capped out-of-pocket costs so that seniors can see relief.
That’s why we banned spread pricing which games the health care system to the detriment of the beneficiary and taxpayer.
That’s why we created a new way of paying for lifesaving, but costly, Medicaid drugs.
And that’s why we capped the growth of government subsidies in Medicare Part to the rate of inflation.
Unlike other proposals, the Senate Finance policy does not tie the launch price to an artificially low price.
It doesn’t stop a drug company from recouping their research and development costs leading to more innovation.
What the Part D inflationary rebate does is very simple.
After launching, if a drug manufacturer chooses to raise its price above the rate of inflation, it has to return the difference for the drugs paid by Medicare.
This policy limits government subsidies to provide predictability for the Medicare program and protection for the American taxpayer.
That’s all.
Any subsidies that pharmaceutical companies would have received from an exorbitant raise in price is returned to Americans, not to line pharma’s pockets.
The inflation rebate incentivizes companies to stabilize their pricing and the taxpayers’ money is used more prudently and efficiently.
CATO, one of the nation’s leading libertarian and free market organizations, praised the bill for its significant cost savings for taxpayers.
Does anyone really think a libertarian organization would endorse price controls?
In its analysis, CATO said the bill “would not impose price controls” and “would reduce wasteful Medicare spending.”
CATO also acknowledged that these “commonsense tweaks to a bloated entitlement program are encountering strong opposition…mostly from those who would not make quite as much money off the taxpayers.”
We all know that Medicare’s finances are worsening.
The program is projected to become insolvent within the next six years if we continue on the same path.
The Grassley-Wyden bill will ensure that the federal government is using Medicare’s budget to pay for life-saving treatments in a fiscally responsible manner.
This goal is not without precedent.
Throughout the American health care system, the government has at one time or another set up different ways to constrain high and rising costs.
For example, states are not allowed to pay Medicaid providers at a rate that is higher than Medicare.
Another example is in the Medicare program.
Medicare Part A pays for the operating costs associated with acute inpatient care using the inpatient prospective payment system or the IPPS.
Congress enacted the IPPS to constrain the growth of Medicare’s inpatient hospital payments by providing incentives for these facilities to provide care more efficiently.
Congress also requires that the concept of “budget neutrality” be applied to a number of Medicare payment systems, including provider payments.
If one provider gets an increase, another provider is reduced.
Finally, the Center for Medicare and Medicaid Innovation within CMS, is required by statute to enforce financial controls on total Medicare spending.
The Center can only test different ways to pay for services in Medicare or Medicaid if they are expected to lower costs while maintaining quality.
This idea of using taxpayer dollars responsibly and in a targeted manner exists in many facets of the American health care system.
My point is, while some call the inflationary rebate in Part D a price control, I urge you to consider how Congress is using measures to contain costs currently.
After all, it is not what hospitals, doctors, or pharmaceutical companies may charge, it is about what the American taxpayer will pay for services.
That’s not a price control.
At the markup for my prescription drug bill, the director of the independent Congressional Budget Office even agreed with me.
I could continue giving examples of budgetary tools in the toolbox that Congress uses in an attempt to be fiscally responsible in Medicare and Medicaid.
And I could also continue to provide examples of outrageous drug costs.
But the bottom line is that The Prescription Drug Pricing Reduction Act of 2019 is a win for Americans across the board.
Seniors will pay less out of pocket, taxpayers will know their money is being used appropriately, and drug manufacturers will continue to be able to innovate.

This is what Ranking Member Wyden and I strove to achieve since the beginning, and I urge all my colleagues to support this legislation.