Budget deal costs pharma

President Donald Trump signed a bipartisan budget agreement on Friday that imposes new costs on drug companies.

The deal includes new rules that shift billions of dollars in costs to pharmaceutical companies from Medicare Part D plans by increasing the discounts companies are required to pay for patients whose drug costs fall in the "donut hole" coverage gap.

Drug companies have been required to pay 50% of the cost of drugs of beneficiaries in the donut hole, and plans were to step up their share of the payments to 25% by 2020. Under the new law, drug companies will pay 70% in 2019 of the drug cost and plans will be locked in at 5%.

Lobbyists from the pharma industry, which learned about the changes Wednesday night, were unable to modify the provisions (see BioCentury Extra, Feb. 8).

For the first time, biosimilars will also be included in the discount program.

The Congressional Budget Office (CBO) estimated the changes will save the government more than $10 billion over 10 years, and industry lobbyists said it will cost industry about $40 billion over the same period.

In addition to changing the Part D discount formula, the law eliminates the Independent Payment Advisory Board (IPAB), which had been created through the Affordable Care Act to contain Medicare costs. It also modified the way Medicaid calculates rebates for line extensions, no longer treating them as new drugs.

The smaller Medicaid rebates will result in $5.7 billion in savings over 10 years, according to the CBO.

Senate Majority Leader Mitch McConnell (R-Ky.) said that as a result of the budget deal, Congress will increase NIH funding by $2 billion over two years to $36.1 billion.