A Key Precedent May Sustain Negotiation To Keep Down Medicare Drug Prices

Medicare drug price negotiation, which holds down prices, may emerge from the long-quiet Senate negotiations on an omnibus policy (“Build Back Better”) bill. On this issue, there has been a back-room discussion between the Majority Leader, Chuck Schumer, and Senator Joe Manchin, who has always has the one vote making a majority vital for passage. A key point will be the thumbs-up from the Senate Parliamentarian. That depends on the precedents.

The issue of negotiated prices for Medicare is one of great public interest. “Negotiation” means the federal government does not simply pay whatever drug companies demand, but a price, set by the “negotiation” process used by the government for defense purchases, that is typically much lower. The high drug prices are not some arcane detail, but a matter that infuriates tens of millions of seniors enrolled in Medicare as well as imposing a huge burden on the budget.

The negotiations have reached this point because Senator Manchin strongly disagrees with much in the original Biden proposal for an extensive omnibus bill. However, he agrees with Medicare drug price negotiation. This is a position he has held for a long time. It is not surprising, considering the needs of his West Virginia constituents.

This bill can only go through the Senate by the reconciliation process. Reconciliation does not need sixty votes for cloture. It would suffice, once the bill qualified for reconciliation treatment, to have the support of the fifty Senate Democrats plus the Vice President’s tie-breaking vote.

But not everything qualifies for reconciliation. The provisions at issue must be budget-related in a narrowly defined way. That was why reconciliation was created – to give an easy part for bills related to taxing and spending could go through.

In charge of regulating what provisions qualify for reconciliation is the Senate Parliamentarian, Elizabeth MacDonough. She has the highest regard, which has carried her uninjured during some major struggles. Just in the last two years, she has advised the Chief Justice as he conducted the Trump impeachment trials. As to reconciliation, last year she opined that a minimum wage increase and an immigration reform provision could not go on a reconciliation bill, a bitter pill for many progressives.

Conversely, during considering the Trump effort to repeal the Affordable Care Act, she faced a provision to end the Independent Payment Advisory Board. She said it did not qualify, when doomed the repeal effort and was a bitter pill for many conservatives.

She always follows precedents closely. In this instance, one may argue that there is a strong precedent in favor of the negotiated Medicare price proposal, at least in large part. The original Affordable Care Act passed as reconciliation. It had a great deal about drug pricing. For the present provision, the case is even stronger. This is not like the minimum wage – something affecting the population and the economy. Medicare drug prices directly affect a substantial component of the largest spending program in the federal budget.

That is not to say there may be particular provisions in the draft for which she gives a thumbs down. She may have something to say about the distinction between federal government Medicare spending, and, spending by Medicare patients.

Still, the ACA is a strong precedent in favor of negotiated Medicare drug prices.