Senate Finance Committee Republicans nearly gutted the core policy in the Senate Finance Committee's major drug-pricing legislation before approving the package Thursday.
Ultimately, 19 senators approved the entire package, with nine Republicans opposing it.
With a tie vote on the amendment, the attempt by Sen. Pat Toomey (R-Pa.) and others ultimately failed. But it forecasts a tough road ahead for the bipartisan package that roiled pharma groups this week and left many leading GOP senators disgruntled despite strong White House support for the legislation.
The provision would affect how much of a price increase Medicare will pay for existing drugs; it basically demands full rebates for the amount that a company raises the price for a drug above the rate of inflation. It is considered the cornerstone of the proposed legislation negotiated over six months by committee Chair Chuck Grassley (R-Iowa) and ranking member Ron Wyden (D-Ore.). It also accounts for a large portion of the more than $100 billion in savings over a decade projected by the Congressional Budget Office for the government and Medicare beneficiaries.
Throughout Thursday's committee markup, Sens. Mike Crapo (R-Idaho), John Thune (R-S.D.) and others blasted the policy as a "price control" or hurting the "free market" aspects of Medicare Part D. These statements echoed points laid out by the Pharmaceutical Research and Manufacturers of America, the leading trade association for pharmaceutical companies.
Supporters of the committee package said that without this policy, the legislation loses its force.
"If you take out the inflation rebates, you basically gutted the bill," argued Shawn Gremminger of the Washington-based liberal advocacy group Families USA. Gremminger has characterized the package as "by far the most significant drug-pricing bill that has a chance of success this year."
Toomey introduced the amendment to strike the penalty the government would impose on any drugmaker that hikes its prices above the rate of inflation. He was joined by Sens. Pat Roberts (R-Kan.), James Lankford (R-Okla.) and, in a late-breaking change, John Cornyn (R-Texas), who posited that under the policy, drugmakers would have to "eat the cost" of limits to their price increases.
Cornyn, who until this year served as majority whip and wields significant influence in the upper chamber, also warned Grassley he found the legislative package "nowhere near ready" for a floor vote.
Ultimately, every Republican member of the committee except Grassley and Sen. Bill Cassidy (R-La.) voted for the Toomey amendment. They were joined by Sen. Bob Menendez (D-N.J.), whose state is a manufacturer base.
CBO Director Phillip Swagel, who testified before the panel on Thursday, said the CBO does not view the proposal as a price control, a point Wyden echoed.
"It does not set prices, it limits subsidies," Wyden said of the policy. "And that is a crucial distinction."
On the other side of the debate, Sen. Debbie Stabenow (D-Mich.) urged the panel to let Medicare negotiate prices as a way to bring existing costs down. The amendment failed, with Republicans unanimously opposed, and all Democrats except Menendez in support.
In one surprise twist early on in the hearing, Grassley said he wanted to revive the proposal dropped earlier this month by the Trump administration, to force pharmacy benefit managers to pass all Part D drug rebates directly to patients when they purchase drugs.
Grassley said the administration "threw a curveball" in withdrawing the embattled Part D rebate regulation, which the CBO projected would cost more than $177 billion. Wyden agreed he wants to look at the entire "broken" pharmaceutical supply chain.
"We do have to figure out this point-of-sale rebate issue," Wyden said.
The GOP's internal fight over the finance legislation underscores a deep divide between the Trump administration and many Senate Republicans over how far the party should be willing to stray from pharmaceutical company interests in the quest to lower prices.
Most Republicans on the committee also voted for an amendment to block the Trump administration's international reference pricing idea for Medicare Part B, which hasn't yet been formalized as an official proposal. Grassley had raised the specter of this policy idea earlier as he urged his members to support the package.
Next steps are unclear for the legislation, as Grassley and the White House will doubtless face ongoing pressure from GOP senators to change the inflation caps policy.
After the vote, Grassley and Wyden hailed the passage of the legislation as a victory. Ultimately, outspoken GOP critics like Cornyn and Sen. Rob Portman (R-Ohio) voted to advance the package.
Grassley warned that reluctant Republicans and the pharmaceutical industry should take the long view of what could happen if they don't act now on what he characterized as a "moderate" approach from him and Wyden.
"I think there's got to be some reality to this whole debate," Grassley said. "Look at what's down the road."
He also flagged a potential deal between the White House and House Democrats, where the momentum is on the side of Medicare negotiation.
"There's got to be a realization on the part of Republicans about that, and there ought to be a realization on the part of pharmaceutical companies of where they would be if we had the non-interference clause go away," he said.
PhRMA CEO Steve Ubl and manufacturer CEOs met with President Donald Trump on Wednesday.
In a statement, PhRMA said Ubl "reiterated our opposition to the current Senate Finance Committee legislation because it fails to achieve this shared goal and imposes harmful price controls in Medicare Part D."
In what could be a preview of the forces in play, Portman proposed shrinking the rebate penalty on manufacturers that raise their prices above inflation from 100% to 20%. Sen. Richard Burr (R-N.C.) made a point of recording his vote against the entire package.