fbpx Skip to main content

Subscribe to Biocom California’s Life Science Public Policy Newsletter

Sweeping Drug Pricing and Tax Reforms Included in $3.5 Tr Reconciliation Package

  • 2021-09-23T17:00:00.000+0000
  • Author: Laure Clark

Democrats face an uphill battle passing their ambitious reconciliation package, also known as the Build Back Better Act, after four House Democrats voted against including H.R.3, the Speaker’s drug pricing bill, into the package, and two Senate Democrats remain opposed to the reconciliation package due to its size and scope. The bill includes a massive amount of reforms, including expanding Medicare and the Affordable Care Act, creating new child care and family leave programs, among other health care, social, education, climate, energy, tax, and immigration programs, and is the largest undertaking of this nature since Franklin D. Roosevelt’s New Deal.

The bill would cost $3.5 trillion over the next ten years and would be paid for mostly by increasing taxes on businesses and individuals by a total of $2.1 trillion ($871 billion when accounting for tax breaks) and using H.R.3 as an offset, which would cost our industry over $600 billion. The fast-track reconciliation process allows Democrats to approve the bill without support from Republicans by bypassing the normal 60-vote requirement to defeat a filibuster. Democrats can only lose 3 votes in the House and none in the Senate for the bill to pass, as all Republicans oppose the bill.

On September 15, Reps. Scott Peters (D-CA), Kurt Schrader (D-OR), and Kathleen Rice (D-NY) sent a strong message to the Speaker by opposing Subtitle E of the package (H.R.3) during the Energy & Commerce Committee’s markup of its sections of the package, preventing the measure from being reported out of the committee on a 29-29 tied vote. Shortly after the failed vote, Rep. Stephanie Murphy (D-Fla.) also opposed the measure during the House Ways and Means Committee’s markup, although the measure was approved by a 24-19 vote.

The two committees share jurisdiction over the drug pricing bill and were the last committees to complete work on their parts of the reconciliation bill and send them to the House budget committee to prepare the bill for the floor. The reconciliation instructions in the budget resolution, S. Con. Res. 14, passed by both chambers in August, gave 13 House and 12 Senate committees until September 15 to draft their legislative proposals. The Senate has yet to produce its own legislation, but Senate leaders have been in talks with the House.

Rep. Peters introduced his own drug pricing bill, H.R.5260, the Reduced Costs and Continued Cures Act, last week as an alternative to H.R.3. The bill was offered as an amendment at the Energy & Commerce markup last week and withdrawn but is enough to threaten a smooth vote on H.R.3. The bill establishes a cap on seniors’ out-of-pocket (OOP) costs, a smoothing mechanism to pay for OOP costs, as well as Pharmacy Benefit Managers (PBMs) reforms that Biocom California has been supportive of, but it also includes Medicare negotiation and inflation rebates, which we oppose. Reps. Schrader, Rice and Murphy have all joined as cosponsors, in addition to Reps. Lou Correa (D-CA) and Josh Gottheimer (D-NJ).

Other contentious issues for the reconciliation bill stem from tax provisions, which were released on September 13. For businesses, the proposal would raise the top corporate tax rate from 21% to 26.5% and raise taxes on overseas earnings for U.S. multinational companies. For individuals, it would restore the top marginal income tax rate to 39.6%, raise the top rate on capital gains from 20% to 25%, add a 3.8% Medicare surtax on income over $5 million, and extend the up-to-$3,600 per year monthly child tax credit. Notably, the bill did not lift the $10,000 cap on state and local tax (SALT) deductions, which Democrats in high-tax states had been advocating for, although Ways & Means Chairman Richard Neal said he’s committed to enacting a bill that includes SALT relief; most likely to be offered as an amendment on the House floor. Of note for our industry, the tax measure also includes a provision that would limit the orphan drug tax credit (ODTC) by making manufacturers ineligible to collect the credit if the drug had previously been approved by the Food and Drug Administration for a separate indication. Biocom California has a long history of supporting the ODTC and is advocating to have this provision removed from the package.