The Senate parliamentarian on Saturday dealt a blow to Democrats’ plan for curbing drug prices but left the rest of their sprawling economic bill largely intact as party leaders prepared for the first votes on a package containing many of President Joe Biden’s top domestic goals.
Elizabeth MacDonough, the chamber’s nonpartisan rules arbiter, said lawmakers must remove language imposing hefty penalties on drugmakers that boost their prices beyond inflation in the private insurance market. Those were the bill’s chief pricing protections for the roughly 180 million people whose health coverage comes from private insurance, either through work or bought on their own.
Other major provisions were left intact, including giving Medicare the power to negotiate what it pays for pharmaceuticals for its 64 million elderly recipients, a longtime goal for Democrats. Penalties on manufacturers for exceeding inflation would apply to drugs sold to Medicare, and there is a $2,000 annual out-of-pocket cap on drug costs and free vaccines for Medicare beneficiaries.
Her rulings came as Democrats planned to begin Senate votes Saturday on their wide-ranging package addressing climate change, energy, health care costs, taxes and even deficit reduction. Party leaders have said they believe they have the unity they will need to move the legislation through the 50-50 Senate, with Vice President Kamala Harris expected to cast votes to break ties, since all of the Republicans are expected to oppose the bill.
“This is a major win 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 period of inflation in four decades.
“At a time of seemingly impenetrable gridlock, the inflation reduction act will show the American people that when the moment demands it, Congress is still capable of taking big steps to solve big challenges,” Schumer said. “We will show the American people that, yes, we are capable of passing a historic climate package and rein in drug companies and make our tax code fairer.”
In response, Senate Minority Leader Mitch McConnell, R-Ky., said Democrats “are misreading the American people’s outrage as a mandate for yet another reckless taxing and spending spree.” He said Democrats “have already robbed American families once through inflation and now their solution is to rob American families yet a second time.”
Dropping penalties on drugmakers reduces incentives on pharmaceutical companies to restrain what they charge, increasing costs for patients.
Erasing that language will cut the $288 billion in 10-year savings that the Democrats’ overall drug curbs were estimated to generate — a reduction of perhaps tens of billions of dollars, analysts have said.
Schumer said MacDonough’s decision about the price cap for private insurance was “one unfortunate ruling.” But he said the surviving drug pricing language represented “a major victory for the American people” and that the overall bill “remains largely intact.”
The ruling followed a 10-day period that saw Democrats resurrect top components of Biden’s agenda that had seemed dead. In rapid-fire deals with Democrats’ two most unpredictable senators — first conservative Joe Manchin of West Virginia, then Arizona centrist Kyrsten Sinema — Schumer pieced together a broad package that, while a fraction of earlier, larger versions that Manchin derailed, would give the party an achievement against the backdrop of this fall’s congressional elections.
The parliamentarian also signed off on a fee on excess emissions of methane, a powerful greenhouse gas contributor, from oil and gas drilling. She also let stand environmental grants to minority communities and other initiatives for reducing carbon emissions, said Senate Environment and Public Works Committee Chairman Thomas Carper, D-Del.
She approved a provision requiring union-scale wages to be paid if energy efficiency projects are to qualify for tax credits, and another that would limit electric vehicle tax credits to those cars and trucks assembled in the United States.
The overall measure faces unanimous Republican opposition. But assuming Democrats fight off a nonstop “vote-a-rama” of amendments — many designed by Republicans to derail the measure — they should be able to muscle the measure through the Senate.
The House is returning Friday to vote on the bill.
“What will vote-a-rama be like. It will be like hell,” Sen. Lindsey Graham of South Carolina, the top Republican on the Senate Budget Committee, said Friday of the approaching GOP amendments. He said that in supporting the Democratic bill, Manchin and Sinema “are empowering legislation that will make the average person’s life more difficult” by forcing up energy costs with tax increases and making it harder for companies to hire workers.
The bill offers spending and tax incentives for moving toward cleaner fuels and supporting coal with assistance for reducing carbon emissions. Expiring subsidies that help millions of people afford private insurance premiums would be extended for three years, and there is $4 billion to help Western states combat drought.
There would be a new 15% minimum tax on some corporations that earn over $1 billion annually but pay far less than the current 21% corporate tax. There would also be a 1% tax on companies that buy back their own stock, swapped in after Sinema refused to support higher taxes on private equity firm executives and hedge fund managers. The IRS budget would be pumped up to strengthen its tax collections.
While the bill’s final costs are still being determined, it overall would spend more than $300 billion over 10 years to slow climate change, which analysts say would be the country’s largest investment in that effort, and billions more on health care. It would raise more than $700 billion in taxes and from government drug cost savings, leaving about $300 billion for deficit reduction — a modest bite out of projected 10-year shortfalls of many trillions of dollars.
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 parts of legislation must be dropped for violating those rules, which include a requirement that provisions be chiefly aimed at affecting the federal budget, not imposing new policy.