Senator Pat Toomey (R-Pa) is expected to offer an amendment to the Prescription Drug Pricing Reduction Act (PDPRA) that will be marked up by the Senate Finance Committee on Thursday.

This amendment removes the Medicare Part D inflationary rebate penalty. ATR urges all Senators to support, co-sponsor and vote for this amendment.

Medicare Part D has existed as a market-based program that relies on competition between pharmacy benefit managers (PBMs), pharmaceutical manufacturers, plans, and pharmacies. At the core of this program is the non-interference clause which prevents the Secretary of Health and Human Services (HHS) from interfering with the robust private-sector negotiations. 

PDPRA undermines this system by instituting a price control mechanism into Part D in the form of an inflationary rebate penalty. Instead of being determined by market forces, prices will now in part be determined through government price setting.

This will disrupt the ability of all stakeholders to negotiate in a way that keeps prices low. In fact, this rebate does nothing to directly lower costs for seniors and may result in a windfall for plans as they are not forced to pass along any savings.

Part D already protects against price increases. Almost 100 percent of medicines are subject to “price protection rebates” negotiated by PBMs which effectively establishes a private sector ceiling or cap on the amount by which the price of a medication can increase.

Part D has also succeeded in keeping costs low and providing seniors with the medicines they need. Since it was first created, federal spending has come in 45 percent below projections – the CBO estimated in 2005 that Part D would cost $172 billion in 2015, but it has cost less than half that – just $75 billion. Monthly premiums are roughly $35 per month, just half the originally projected amount, while 9 in 10 seniors are satisfied with the Part D drug coverage.

As the Senate Finance Committee takes up their proposal, they should adopt Toomey’s amendment to strip the inflationary rebate penalty and safeguard free market competition in Medicare Part D.