Hardliners Rebel in Anger Over Debt Limit Deal

Plus: Merck sues to block Medicare drug price negotiations ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ [The Fisc](   By Yuval Rosenberg and Michael Rainey Good evening. The fallout over the deal to raise the debt limit continues. We’ve got details. House conservatives derailed McCarthy's agenda. (Reuters) House Conservatives Spring a Surprise Rebellion A group of conservatives, still angry over the deal Speaker Kevin McCarthy struck with President Joe Biden to resolve the debt limit fight, blindsided Republican leaders Tuesday with a protest vote on the House floor. About a dozen House Freedom Caucus members derailed their leadership’s plans to take up Republican legislation to impose new oversight on agency rules and prohibit the Biden administration from regulating gas stoves. The conservatives “voted against moving forward on a bill they support,” as [Politico]( puts it, adding that some in the GOP worry that additional actions to undercut the speaker could follow what some Republican rebels indicated was a spontaneous revolt. Conservatives still want to roll back discretionary spending to 2022 levels. Some Freedom Caucus members say McCarthy violated an agreement to insist on that in the debt limit deal. “Today we took down the rule because we’re frustrated at the way this place is operating,” Rep. Matt Gaetz of Florida told reporters, according to [CNN](. “We took a stand in January to end the era of the imperial speakership. We’re concerned that the fundamental commitments that allowed Kevin McCarthy to assume the speakership have been violated as a consequence of the debt limit deal, and, you know, the answer for us is to reassert House conservatives as the appropriate coalition partner for our leadership, instead of them making common cause with Democrats.” The last time the House voted down a procedural rule for debate on legislation was 2002, Politico reports, citing the Congressional Research Service. Jake Sherman of Punchbowl News called it an “incredible embarrassment for the House Republican leadership” and a [slap in the face]( to McCarthy and his leadership team. Why it matters: “The revolt underscored the fragility of McCarthy’s narrow majority and the lingering tensions with the right-wing of his conference over the debt deal. But the protest also indicated that the members have not yet decided on whether to call for a vote ousting McCarthy from the speakership, something that would rip apart the House GOP and send the chamber into chaos,” CNN’s Manu Raju, Melanie Zanona and Morgan Rimmer write. “For now, the conservatives have settled on a strategy to scramble McCarthy’s legislative agenda until they believe he will listen to their list of demands.” McCarthy Pushes Back Against Additional Aid for Ukraine In another sign of simmering tensions over the debt limit deal, House Speaker Kevin McCarthy said Monday that he does not support providing additional aid to Ukraine through a supplemental funding bill, casting doubt on a still-developing plan in the Senate to send more military assistance to the war-torn country at some point later in the year, despite the strict spending caps laid out in the recently enacted legislation that suspends the federal debt limit. A bipartisan group of defense hawks including Republican Sen. Lindsey Graham of South Carolina wants to give more aid to Ukraine. Majority Leader Chuck Schumer assured them that the debt deal would not prevent them from doing so, despite the spending caps it imposes. The Fiscal Responsibility Act sets a defense budget of $886 billion in fiscal year 2024, which begins in October, with a 1% increase the following year. Graham has made it clear that he sees the agreement as inadequate. “The people who negotiated this, I wouldn’t let them buy me a car,” he told reporters last week. McCarthy said that if Senate Republicans want to provide Ukraine with additional military aid, the funds will have to come from the defense budget. “I’m not going to pre-judge what some of them [in the Senate] do, but if they think they’re writing a supplemental because they want to go around an agreement we just made, it’s not going anywhere,” McCarthy told [Punchbowl News](. McCarthy’s stance sets up a potential clash between populist conservatives in the House, who are skeptical about providing aid to Ukraine, and defense hawks in the Senate, who want to provide more funding for both Ukraine and the Pentagon. Sen. Susan Collins of Maine, the senior Republican on the appropriations panel, described the Senate plan last week. “The first problem of an inadequate defense budget could be addressed and remedied by having an emergency defense supplemental,” she said. “That is what we need to do. That is what I would ask the administration and my colleagues on the other side of the aisle to commit to.” McCarthy told [CNN]( that lawmakers should be able to find the money in the existing budget, in the form of waste that can be eliminated. “I think what we really need to do, we need to get the efficiencies in the Pentagon,” he said. “Think about it, $886 billion. You don’t think there’s waste? They failed the last five audits. I consider myself a hawk, but I don’t want to waste money. So I think we’ve got to find efficiencies.” Merck Sues to Block Medicare Drug Price Negotiations Pharmaceutical giant Merck on Tuesday sued the U.S. government over the federal law enacted last year that allows Medicare to negotiate certain prescription drug prices with manufacturers. In the [lawsuit]( filed in federal district court, Merck argues that the drug price negotiations, established as part of the Inflation Reduction Act, will undercut innovation and violate the Constitution. The company cites the Fifth Amendment requirement that the government pay “just compensation” if it takes property for public use and claims that the Inflation Reduction Act would allow the government to take Merck’s patented innovations without paying the drugs’ fair value. The company also argues that the new law violates the company’s First Amendment right to free speech by creating the misleading impression that the company is voluntarily agreeing to negotiations that Merck calls a “sham” and “tantamount to extortion.” Merck argues that the government could have simply imposed price caps or structured negotiations in a way that allowed drug companies to refuse to contract with Medicare if they couldn’t agree on a price. It argues that lawmakers instead chose a convoluted structure for political purposes. “The scheme’s aim is to deceive the American public,” the lawsuit charges. “Its forced messaging promotes the (false) impression that manufacturers acquiesce in—indeed, agree with—prices imposed by HHS decree.” The White House pushed back on the suit. “Big Pharma regularly forces Americans to pay many times what they do customers in other countries for the exact same medicines," White House spokeswoman Karine Jean-Pierre said in a statement cited by [Reuters](. "We are confident we will succeed in the courts. There is nothing in the Constitution that prevents Medicare from negotiating lower drug prices.” Why it matters: After a vigorous public relations and lobbying effort, this is the pharmaceutical industry’s first attempt at challenging a law it despises — one that President Biden has highlighted repeatedly as a victory in a long-running battle to lower prescription drug prices. In his Oval Office address last Friday night, Biden mentioned the drug price negotiations as a key legislative accomplishment he preserved in his deal with House Speaker Kevin McCarthy to raise the debt limit. Biden repeated an oft-used line that last year’s law “finally beat Big Pharma,” something the president says he’s been trying to do for more than 30 years. The new law allows the Secretary of Health and Human Services to negotiate prices of a very limited number of drugs to be selected from among the 50 drugs with the highest spending in Medicare’s Part D prescription drug program and the 50 doctor-administered drugs with the highest spending in Medicare Part B. The program will start with 10 Part D drugs for 2026 and ramp up from there, adding up to 15 more Part D drugs for 2027, up to 15 Part B or Part D drugs for 2028 and up to 20 more Part B or Part D drugs each year after that. The law also includes an excise tax to be levied on companies that walk away from the negotiation process. The Congressional Budget Office has estimated that the negotiations enacted last year will save Medicare nearly $100 billion over 10 years. It has also said that the drug pricing measures in the Inflation Reduction Act, which go beyond just the Medicare negotiations, would modestly reduce the number of new drugs brought to market over time. The government says it will announce the first 10 drugs chosen for price negotiations by September 1, 2023. Biden has said he hopes to expand the price negotiations to have them cover more drugs. Merck said in its filing that its diabetes drug Januvia is expected to be subject to the first round of negotiations, while another diabetes drug, Janumet, and the company’s top-selling drug, the cancer treatment Keytruda, are expected to be subject to negotiations in following cycles. Keytruda generated nearly [$21 billion]( in revenue for Merck last year, accounting for more than a third of the company’s $59.3 billion in worldwide sales. Merck recorded $14.5 billion in profits last year, up from $12.3 billion in 2021. The bottom line: Legal experts told Reuters that Merck’s constitutional grounds are weak — but the case could be headed for the Supreme Court, and other challenges from the pharmaceutical industry are likely to follow. Number of The Day: 225,000 The debt limit deal passed last week includes changes to the work requirements for the Supplemental Nutrition Assistance Program, commonly known as food stamps. SNAP already requires beneficiaries aged 18 to 49 without children to work or participate in job training for at least 20 hours per week. The new legislation raises the top of the age range to 54. In an analysis of the change, the Center on Budget and Policy Priorities estimates that out of 750,000 people newly subject to the work requirements, 225,000 are likely to lose their benefits. CBPP notes that the rule change includes new waivers for veterans, people experiencing homelessness and former foster youth. But an “overwhelming majority” of those subject to the new rules do not qualify for those waivers. “Those who would be newly at risk of losing food assistance have very low incomes, typically well below the poverty line, and would be pushed even deeper into poverty if they lose SNAP,” CBPP’s Katie Bergh and Dottie Rosenbaum [write](. Ed Bolen, a CBPP expert on the food stamps program, questioned the need for the new rules. “You’re not going to balance the budget, much less pay down the debt, through these kinds of changes,” he [told]( CNBC. --------------------------------------------------------------- Send your feedback to yrosenberg@thefiscaltimes.com. And please encourage your friends to [sign up here]( for their own copy of this newsletter. --------------------------------------------------------------- Fiscal News Roundup - [GOP Hardliners Revolt and Derail McCarthy’s Agenda in Retaliation Over Speaker’s Debt Limit Deal]( – CNN - [Merck Sues US, Calling Move to Cut Drug Prices ‘Extortion’]( – Bloomberg - [McCarthy Opposes More Ukraine Funding Pushed by Other Republicans]( – Bloomberg - [McCarthy May Have Just Torpedoed GOP Hopes of Boosting the Defense Budget]( – Politico - [Congress Tees Up FAA, Pipeline Safety, Rail, Supply Chain Bills]( – Roll Call - [Biden Campaign Launches Ad Blitz Capitalizing on Debt Ceiling Deal]( – Politico - [Biden Back on the Attack — Hits GOP for Threatening Social Security]( – Politico - [White House Website Highlights Infrastructure, Manufacturing Investments as Biden Pushes Policy Wins]( – Associated Press - [World Bank Offers Dim Outlook for the Global Economy in Face of Higher Interest Rates]( – Associated Press - [Global Economy Struggles Amid Inflation, Pandemic Aftershocks and War]( – Washington Post - [Jim Grant Warns of a ‘Generation-Length’ Rise in Interest Rates]( – Bloomberg - [Biden Announces Initial $115 Million Investment in Jackson, Mississippi, Water Infrastructure]( – CNN Views and Analysis - [The Debt-Ceiling Deal Was Just the Start]( – Bloomberg Opinion Editors - [When Historic Successes Don’t Move Voters]( – Harold Meyerson, American Prospect - [Making Manufacturing Great Again]( – Paul Krugman, New York Times - [How Big Pharma Rigged the Patent System]( – Ryan Cooper, American Prospect - [The Real Reasons Why Workers Are Producing Less]( – Timothy Noah, New Republic - [758 Doctors for 19 Million Kids. The Safety Net for Kids Is Gone]( – Alyssa Rosenberg, Washington Post - [The Book I Wish Every Policymaker Would Read]( – The Ezra Klein Show, New York Times (podcast) Copyright © 2023 The Fiscal Times, All rights reserved. You are receiving this newsletter because you subscribed at our website or through Facebook. The Fiscal Times, 399 Park Avenue, 14th Floor, New York, NY 10022, United States Want to change how you receive these emails? [Update your preferences]( or [unsubscribe](