Senate lawmakers on Saturday dealt a blow to Democrats’ plan to cap drug prices but left the rest of their sprawling economic bill largely intact, as party leaders prepared for the first votes on a package that includes many of President Joe Biden’s key domestic goals .
Elizabeth MacDonough, the chamber’s nonpartisan rules arbitrator, said lawmakers must remove language that imposes large penalties on drugmakers that increase their prices beyond inflation in the private insurance market. It was the bill’s main price protection for the roughly 180 million people whose health coverage comes from private insurance, either through work or bought on their own.
Other key provisions were left intact, including giving Medicare the power to negotiate what it pays for drugs for its 64 million elderly beneficiaries, a longtime goal of Democrats. Penalties on manufacturers for exceeding inflation will apply to drugs sold to Medicare, and there is a $2,000 annual cap on drug costs and free vaccines for Medicare beneficiaries.
Her rulings came as Democrats planned to begin Senate votes Saturday on their sweeping package of climate change, energy, health care costs, taxes and even deficit reduction. Party leaders have said they believe they have the unity they need to move the legislation through the 50-50 Senate, where Vice President Kamala Harris is expected to cast the tie-breaking votes as all Republicans are expected to oppose the bill.
“This is a great victory for the American people,” Senate Majority Leader Chuck Schumer, D-N.Y., said of the bill, which both parties are using in their election-year campaigns to assign blame for the worst run of inflation in four decades.
“At a time of seemingly impenetrable crisis, the Inflation Reduction Act will show the American people that when the moment calls for it, Congress is still capable of taking big steps to solve big challenges,” Schumer said. “We want to show the American people that yes, we are capable of passing a historic climate package and reining in pharmaceutical companies and making our tax code fairer.”
In response, Senate Minority Leader Mitch McConnell, R-Ky., said Democrats are “misinterpreting the outrage of the American people as a mandate for another reckless tax and spending spree.” He said Democrats “have already robbed American families once through inflation, and now their solution is to rob American families one more time.”
Dropping penalties for drugmakers reduces incentives for drug companies to limit what they charge, raising costs for patients.
Deleting that language would cut the $288 billion in 10-year savings that Democrats’ overall drug restrictions were estimated to generate — a reduction of perhaps tens of billions of dollars, analysts have said.
Schumer said MacDonough’s decision on the private insurance price cap was “one unfortunate decision.” But he said the surviving pricing language represented “a great victory for the American people” and that the overall bill “remains largely intact.”
The ruling followed a 10-day period in which Democrats revived top components of Biden’s agenda that had appeared dead. In quick deals with the Democrats’ two most unpredictable senators — first conservative Joe Manchin of West Virginia, then Arizona centrist Kyrsten Sinema — Schumer put together a broad package that, while a fraction of earlier, larger versions that Manchin derailed, would provide party an achievement against the backdrop of the autumn congressional elections.
The parliamentarian also signed a fee on excess emissions of methane, a strong contributor of greenhouse gases, from oil and gas drilling. She also passed environmental grants for minority communities and other initiatives to reduce carbon emissions, said Senate Environment and Public Works Committee Chairman Thomas Carper, D-Del.
She approved a provision requiring union wages to be paid if energy efficiency projects are to qualify for tax credits, and another that would limit tax credits for electric vehicles to those cars and trucks assembled in the United States.
The overall measure faces unanimous Republican opposition. But assuming Democrats fight a nonstop “vote-a-rama” of amendments — many designed by Republicans to derail the measure — they should be able to strengthen the measure through the Senate.
The House returns Friday to vote on the bill.
“What a vote-a-rama is going to be. It’s going to be hell,” Sen. Lindsey Graham of South Carolina, the top Republican on the Senate Budget Committee, said Friday of the upcoming GOP changes. He said that by supporting the Democratic bill, Manchin and Sinema are “authorizing legislation that will make life harder for the average person” by forcing up energy costs with tax increases and making it harder for businesses to hire workers.
The bill offers spending and tax incentives to move toward cleaner fuels and support coal with help to reduce carbon emissions. Expiring grants that help millions of people afford private insurance premiums will be extended for three years, and there is $4 billion to help Western states fight drought.
There would be a new minimum tax of 15% on some companies that make over $1 billion annually, but pay far less than the current 21% corporate tax. There would also be a 1% tax on companies buying back their own shares, traded in after Sinema refused to back higher taxes on private equity firm executives and hedge fund managers. The IRS budget would be pumped up to bolster its tax collections.
While the final cost of the bill is still being determined, it would spend a total of more than $300 billion over 10 years to curb climate change, which analysts say would be the nation’s largest investment in the effort, and billions more on health care. That would raise more than $700 billion in taxes and from state drug cost savings, leaving about $300 billion for deficit reduction — a modest bite of the projected multi-trillion-dollar 10-year deficit.
Democrats are using special procedures that would let them pass the measure without having to reach the 60-vote majority that legislation often needs in the Senate.
It is the parliamentarian’s job to decide whether pieces of legislation should be dropped for violating those rules, which include a requirement that provisions primarily aim to affect the federal budget, not impose new policy.