The Medicare Drug Price Negotiation Act wwould allow the government to negotiate directly with drug companies to lower prices for Medicare beneficiaries, much like the VA (Veteran Affairs) and Medicaid do today.

Current law prohibits the Secretary of Health and Human Services (HHS) from negotiating directly for lower prices in Medicare, even though Medicare paid for 29% of retail drug costs in 2015. The federal government could save between $15.2 billion and $16 billion a year if Medicare Part D paid the same prices as Medicaid or VA.

President Trump has warned that the pharmaceutical industry is “getting away with murder,” has criticized “outrageous” drug prices, and has pledged to create a “fair and competitive bidding process” that would result in prices “coming way, way, way down.”

President Trump has also publicly acknowledged the “massive” spending and lobbying by the pharmaceutical industry have driven drug prices “through the roof.” Although President Trump has supported the idea, he has not acted on the subject.

According to Senator Sanders' press release on the legislation, the bill "would leverage the purchasing power of the government by using formularies to enhance competition and establish a fallback price—based on what other federal agencies and foreign countries pay—to kick in automatically if negotiations are unsuccessful."

The bill would also preserve critical protections for patient access and strengthen patient appeals processes.

The legislation would restore rebates on drugs covered under Part D for low-income beneficiaries, which were eliminated when Part D was created. The rebates apply to both brand-name and generic drugs and extends rebates to all Medicare beneficiaries who are covered by the Low-Income Subsidy, in addition to those who are dually eligible for Medicare and Medicaid. According to the Congressional Budget Office, restoring these rebates for brand-name drugs alone would save taxpayers $145 billion over ten years.

The Secretary is to publish a report with the criteria assessed for every negotiation made. Each negotiation is to be made over the course of one plan year. If enacted, the first negotiation year would begin on January 1, 2019. Once a price is reached, that price will remain in effect for three years.