It’s been slightly over a month since Democrats achieved a compromise on a prescription drug plan for the House reconciliation bill. We continue to believe that Build Back Better (“BBB”) is the only opportunity for Democrats to make good on their key campaign promise to reduce prescription drug pricing as they head into the 2022 midterms. Accordingly, our outlook remains for inclusion in BBB of a provision to lower prescription drug prices that is sent to President Biden for his signature.
We think it is unlikely Senate Democrats will open the House-passed drug pricing plan for changes, absent a ruling from the Senate parliamentarian that the provision as written does not comply with the chamber’s budget rules. The fragile balancing act Democrats faced in achieving the compromise underlies our thinking.
To recap, the compromise was months in the making after three centrists among House Democrats threatened to tank the entire bill over objections the original pricing plan was too broad. Compromise was spurred in a last-minute effort only after it was omitted from a White House announcement of the scaled-back reconciliation framework. On the Senate side, where Democrats cannot spare a single vote, three senators – Kyrsten Sinema (AZ), Robert Menendez (NJ) and Tom Carper (DE) – whose support had been uncertain have already expressed support for the current language.
House Democrats’ goal is to keep intact the hard sought compromise that includes giving Medicare new authority to negotiate the pricing on some high-cost prescription drugs, among other things. The Congressional Budget Office estimates that the prescription drug plan results in fiscal savings of $261.9 billion over 10 years, with $78 billion of that from giving Medicare the authority to negotiate.
President Biden yesterday delivered remarks promoting the drug pricing plan to push senators to pass BBB. Likewise, the House Oversight and Reform committee will hold a hearing on Thursday to keep attention on the plan. The hearing will review the committee’s three-year investigation into drug pricing and the need for structural reform. These messaging events coincide with preliminary meetings Senate Democrats began this week with the parliamentarian to discuss the provision. A potential bipartisan meeting with the parliamentarian is also possible this week as Republicans argue that the drug pricing provision is not directly related to federal spending and so should not be included under reconciliation.
The parliamentarian serves as the referee in these disagreements. She will not issue a formal ruling until after the Senate Health, Education, Labor and Pensions Committee sends her the final text of its reconciliation instructions. (Eight of 12 Senate committees have already sent her their reconciliation language.) Senate Majority Leader Chuck Schumer plans to have BBB on the Senate floor the week of December 13. Delays by the remaining committees in finalizing text or rulings by the parliamentarian could result in the schedule slipping.
Should the parliamentarian decide against any part of the drug pricing text because it does not meet Senate budget rules, we expect Democrats will rework the language to comply with the ruling. In other words, we do not expect a final BBB without a drug pricing provision. Again, it is unlikely Democrats will rewrite any portion of the House-passed language unless compelled by a ruling of the parliamentarian.
We reiterate our core view of the overall reconciliation bill that before Christmas Democrats will pass Biden’s social safety net and climate change bill in the range of $1.5 – $1.8 trillion. As we have previously written, the other scenarios include the timing slipping into January which we rank as less likely, or Democrats failing to reach an agreement being the least likely outcome.
