The Build Back Better Act (BBBA) is a $1.75 trillion budget reconciliation bill passed by the House of Representatives on November 19, 2021 and currently pending before the U.S. Senate. Part of President Biden’s Build Back Better domestic policy agenda, the bill covers a wide scope of policies, including healthcare and drug pricing reforms (further details below). Given the slim majorities Democrats hold in both the House and the Senate, the bill is being considered through the budget reconciliation process. This process provides a path for enacting legislation with a simple majority vote (51) in the Senate rather than the traditional 3/5ths threshold for passage (60). This means Democrats cannot lose a single Senator in the 50-50 split Senate. Vice President Kamala Harris would then serve as the tie-breaking 51st vote.
The BBBA is a massive bill with significant provisions related to healthcare, education, tax, climate change, and immigration policy. Among the healthcare provisions are policies to expand the Medicare benefit to include hearing coverage, expand Medicaid, extend enhanced ACA marketplace subsidies, and increase investments in home- and community-based services. These policies are partially offset by a slate of Medicare drug pricing measures, including a new Part B negotiation program, new manufacturer rebates imposed for increasing list prices above the rate of inflation, a Part D redesign and new beneficiary out-of-pocket cap, and a permanent repeal of the Trump Administration’s “Rebate Rule.” Each of these changes are discussed in more detail below, but are subject to change as Senate negotiations continue.
The BBBA allows the HHS Secretary to negotiate prices for high cost drugs and insulin nearing or following the end of their market exclusivity (9 years for small molecule drugs; 13 years for biologics) in Medicare Part D beginning in 2025 and Medicare Part B beginning in 2027. Products must not have generic or biosimilar competition.
Negotiated prices, known as Maximum Fair Prices (MFP) would be available to both Medicare fee-for-service and Medicare Advantage, but not commercial plans. MFP ceiling prices are specified in the legislation based on a drug’s years since FDA approval, creating price reductions of 25-60% off average manufacturer prices.
MFP agreements continue in perpetuity as the drug stays on the top 50 highest-spend drug lists for both Parts B and D. Renegotiations may be triggered for new indications, changes in exclusivity status, R&D and product costs, and market data. Manufacturers failing to negotiate with HHS would be subject to excise taxes of 65% on the drug’s gross sales, rising to 95% for each quarter of noncompliance. The bill includes protections for small manufacturers, excluding them from negotiation in the initial years and limiting MFP discounts to no more than 44% off non-federal average manufacturer prices in 2028 and 2029. Drug price negotiation has been championed by Democrats for years, though this is the closest the policy has come to enactment. Republicans generally oppose allowing Medicare to negotiate directly for drug prices.
The BBBA creates a new mandatory rebate to be paid by drug manufacturers for increasing Parts B and D list prices above the rate of inflation beginning on July 1, 2023. Rebate amounts vary by drug and are to be assessed based on the percentage of the drug price exceeding the inflation benchmark. Manufacturers refusing to pay the mandated rebates would be subject to civil monetary penalties equal to or at least 125 percent of the rebate amount for such calendar quarter. This policy has been proposed in previous bills and maintains bipartisan support.
This provision creates a new Part D cap for prescription drugs costs by setting the annual beneficiary out-of-pocket limit at $2,000 beginning in 2024. It also lowers beneficiary coinsurance in the initial coverage phase to 23%. The section reduces from 80% to 20% the government reinsurance in the catastrophic phase of Part D coverage for applicable brand drugs and for non-applicable drugs, government reinsurance is 40% in the catastrophic phase. The provision also converts the current coverage gap discount program into a benefit-wide responsibility, requiring manufacturers of branded drugs to contribute to payments in both the initial (10%) and catastrophic phases (20%) of the benefit, and allowing for a discount phase-in for certain drug manufacturers. The BBBA also allows Medicare beneficiaries to spread MA and Part D out-of-pocket costs throughout the plan year (known as “patient smoothing”). Most of these policies enjoy bipartisan support.
The BBBA prohibits implementation of the Trump Administration’s “Rebate Rule” (Fraud and Abuse; Removal of Safe Harbor Protection for Rebates Involving Prescription Pharmaceuticals and Creation of New Safe Harbor Protection for Certain Point-of-Sale Reductions in Price on Prescription Pharmaceuticals and Certain Pharmacy Benefit Manager Services Fees). This rule was intended to channel existing rebates between manufacturers and PBMs into patient savings at the pharmacy counter, eliminating the safe harbor for rebates and establishing a new safe harbor for discounts extended to patients at point-of-sale. The Rebate Rule cost the federal government nearly $180 billion due to its effect of increasing premiums. By repealing the rule, the federal government saves billions of dollars. This rule divides along party lines, with Democrats preferring to scrap it in favor of alternative drug pricing reforms and with Republicans preferring to keep the rule.
In an effort to incent the development and utilization of biosimilars, the Senate Finance Committee has proposed adding a temporary add-on payment increase for Part B biosimilar drugs to the BBBA. The provision would increase reimbursement for biosimilars to Average Sales Price (ASP) +8% beginning on April 1, 2022 for 5 years. This a 2% increase to the ASP add-on. It is not inclusive of Medicare sequestration effects. This policy has attracted bipartisan support in the past.
The BBBA includes PBM oversight and transparency measures requiring PBMs to provide reports in machine-readable format to sponsors of group health plans every six months. Reports required under this section must include information regarding the administration of prescription drug benefits by PBMs and detailed information regarding the rebates, fees, and other compensation paid to the PBMs. PBM transparency is supported across the aisle, though these provisions may be stripped from the BBBA due to the constraints of the budget reconciliation process.
Upon passage in the House, the bill was transmitted to the Senate for consideration in late November 2021. Senate committees have been working to align the legislation with its members’ priorities, get cost estimates from the Congressional Budget Office, and confirm reconciliation compliance with the Senate’s parliamentarian. While Senate Majority Leader Chuck Schumer (D-NY) had expressed a desire for the Senate to vote on the BBBA by Christmas 2021, the chamber was unable to reach that goal. On December 19, moderate Senator Joe Manchin (D-WV) appeared on Fox News Sunday indicating he tried “everything humanly possible” to support the legislation. “This is a no on this legislation,” he continued. In March 2022, Sen. Manchin suggested he would support a narrower reconciliation measure including savings from drug pricing policies and tax reform.
The US Oncology Network issued a statement expressing strong concerns with the BBBA’s drug pricing provisions, particularly the new Part B negotiation program. Click Here to read the statement. The Network regularly engages with Members of Congress to express these concerns directly and advocate for more patient- and provider-friendly drug cost reforms.
