Simulating the Impact of the Drug Price Negotiation Proposal in the Build Back Better Act

For this analysis, we simulated the process of selecting negotiation eligible drugs under the approach proposed in the Build Back Better Act (BBBA), using 2020 as the first year of selecting products for negotiation. Using the same two-year timeframe as the negotiation process in the BBBA, drugs selected for negotiation in 2020 would have their negotiated price available in 2022. We determine whether any of those drugs would be eligible for the negotiation process based on the approval date, orphan drug status and indications, whether the total expenditure exceeds the $200 million expenditure floor, and status as a reference product for a biosimilar/generic.

For top-spending Part B and Part D drugs, negotiation eligible drugs would be a selected drug in 2020 based on the following criteria:

• for biologics, approved/licensed prior to 2009 (since that is at least 11 years from a hypothetical February 1, 2020 selected drug publication date, assuming implementation in 2022 for this analysis)
• for small-molecule drugs, approved/licensed prior to 2013 (since that is at least 7 years from a hypothetical Feb 1, 2020 selected drug publication date, assuming implementation in 2022 for this analysis)
• does not have an approved generic/biosimilar
• is not designated as an orphan drug; has approved orphan drug designations for more than one rare disease/condition; or is past the orphan exclusivity period
• above $200 million in total Part B drug spending and total Part D spending combined
• is not derived from human whole blood or plasma

For drugs with multiple formulations and/or dosage amounts we combine the drugs into one and use the same criteria. We use the earliest, non-discontinued FDA approval date among the combined drugs and consider them to have a generic/biosimilar or orphan exclusivity if any one does. The BBBA provides some latitude to the Secretary of Health and Human Services for handling drugs with multiple formulations and/or dosage amounts which may result in differences with our methodology during a negotiation selection process.

To calculate the spending and count of beneficiaries for a drug, we used 2019 claims data for Part B drugs and 2019 prescription drug event data for Part D drugs from a 20% sample of Medicare beneficiaries, removing drugs taken by fewer than 11 beneficiaries in the sample. Part B claims include beneficiaries in traditional Medicare only; Part D claims include beneficiaries in stand-alone prescription drug plans and Medicare Advantage drug plans. Using HCPCS for Part B drugs, claims were pulled from the outpatient, carrier, and durable medical equipment (DME) files, removing packaged drugs, vaccines, and claims from Maryland hospitals, Critical Access Hospitals, and dialysis facilities. Data on the approval date, generic/biosimilar reference status, and orphan status come from the FDA Orange Book (for small-molecule drugs) and Purple Book (for biologics).

To derive the top 20 separately payable Medicare Part B drugs and top 20 Medicare Part D drugs by total spending in 2019, we adjust the spending and beneficiary counts to be representative of the population. For drugs with multiple formulations and/or dosages, we add the individual total spending amounts together and count the number of unique beneficiaries (if a beneficiary switched between formulations during the year, they would only be counted once). Total spending includes the amount paid by Medicare and the beneficiary liability amount. Part D spending does not account for rebates; however, under the BBBA, Part D drugs would be ranked based on total gross spending not accounting for rebates.