Biden Budget to Propose Saving Hundreds of Billions by Cutting Drug Prices, Fraud

President will lay out plans to raise business taxes and reduce wasteful spending

President Biden’s budget blueprint will lay out plans to save hundreds of billions of dollars by seeking to lower drug prices, raising some business taxes, cracking down on fraud and cutting spending he sees as wasteful, according to White House officials.

Mr. Biden is set to release his fiscal 2024 budget plan on Thursday. Administration officials said it would propose cutting federal budget deficits by nearly $3 trillion over the next decade. The proposal is unlikely to gain momentum, with Republicans expected to oppose many of Mr. Biden’s plans, and it will include some ideas that didn’t become law while Democrats controlled the House and Senate. But the release of the budget will kick off monthslong spending negotiations with lawmakers.

The document is expected to lay out the president’s priorities for the next two years and shed light on possible themes of his expected re-election campaign. White House officials said the budget will call out large corporations, including the oil industry and drug companies.

Mr. Biden is expected to put forward a defense budget of more than $835 billion, according to people familiar with the matter. That is a higher recommended defense budget than last year’s request, against a backdrop of the continuing conflict in Ukraine and rising tensions with China.

The White House said the budget will outline a plan requiring that insurance companies that run Medicaid Managed Care programs pay back Medicaid if companies charge more than the cost of patient care. In managed care, the state contracts with private insurance companies to provide the benefits on behalf of the state. States pay the managed-care company generally a set amount each month.

The proposal would save $20 billion over 10 years, the White House said, and is similar to what is already required of Medicare Managed Care plans. More than 70% of Medicaid enrollees are in managed-care plans, and the numbers are expected to increase.

A series of new prescription drug-related proposals would save more than $200 billion over a decade by imposing new rules on the pharmaceutical industry, according to the White House. The budget plan would allow Medicare to negotiate prices for more drugs and bring them into negotiation sooner after they launch. This proposal has been criticized by PhRMA, the trade group for the pharmaceutical industry, which says it will mean less revenue for research and development of new drugs.

In addition, the budget will propose giving the Department of Health and Human Services authority to negotiate additional Medicaid drug rebates on behalf of states to pool and increase buying power, the White House said.

The effort builds on a provision in the climate, healthcare and tax legislation that Mr. Biden signed last year that empowers Medicare to negotiate how much it pays for certain high-price prescription drugs. That process is supposed to begin in 2026, with the number of drugs up for negotiation expanding to 15 by 2027 from 10 the year before.

The budget will also propose extending to commercial health insurance a provision in the climate, healthcare and tax legislation that requires drugmakers to pay Medicare rebates on treatments whose prices rise by more than the rate of inflation.

The president’s proposal will also call for expanding access to prevention and treatment options for HIV/AIDS and hepatitis C. The White House said this would lower Medicaid costs by $10 billion over a decade. The budget would establish a hepatitis C subscription model that the White House said would cut spending in the program by hundreds of millions of dollars annually.

The administration has already signaled many of its tax priorities, including a new minimum tax on wealthy individuals’ unrealized capital gains and a quadrupled tax on stock buybacks.

That minimum tax would be 25%, up from 20% in last year’s proposal. As he has done before, Mr. Biden will propose raising the top individual tax rate to 39.6% from 37%, raising the corporate tax rate to 28% from 21%, taxing top earners’ capital gains at higher rates and increasing taxes on U.S. companies’ foreign profits.

Mr. Biden will also propose extending the solvency of a key Medicare trust fund by at least 25 years, according to the White House, in part by increasing tax rates on people earning more than $400,000 a year. That proposal has drawn pushback from some Republicans.

“That is not going to happen. Obviously he knows that,” said Sen. Mitt Romney (R., Utah). “Republicans are not going to sign up for raising taxes.”

Mr. Biden’s budget will reprise a series of tax increases that the administration couldn’t get through the last Congress, which was controlled by its Democratic allies.

For example, Mr. Biden again wants to raise taxes on private-equity managers’ carried-interest income, White House officials said. That plan was blocked last year by Sen. Kyrsten Sinema (I., Ariz.).

Mr. Biden will also call for raising $23 billion by limiting retirement-account benefits for wealthy people. That includes new limitations on people making over $400,000 who also have at least $10 million in account balances.

He will also propose changing the tax treatment of cryptocurrency transactions, raising $24 billion. Currently, according to the administration, those sales aren’t subject to the same so-called wash-sale rules that apply to stocks and bonds. That means people can sell their underwater crypto investments, take a tax-deductible loss and buy right back into the same investment. Lawmakers weighed such a change in the last Congress, but it didn’t become law.

Mr. Biden will call again for higher taxes on oil-and-gas companies, totaling $31 billion, according to White House officials. As he did in last year’s budget, Mr. Biden would end what are known as like-kind real-estate transactions, in which owners can defer capital gains from one property transaction by investing in another. Those didn’t get much attention in Congress.

The budget will include elements of a wide-ranging $1.6 billion proposal from the Biden administration that is aimed at cracking down on fraud stemming from the government’s coronavirus pandemic-relief programs.

The plan calls for increasing pandemic-fraud investigations and prosecutions, including by tripling the number of Justice Department “strike forces” that target criminal organizations behind some big fraud cases. It also seeks funding to help prevent identity theft tied to pandemic-benefit programs and support victims of identity theft. The White House estimated that every dollar spent on oversight and enforcement will result in a return of at least $10 for taxpayers.

The White House will propose measures it said would make federal programs more cost- effective. Officials said the president will call for canceling nearly $1 billion in construction funding meant to expand prison capacity, which they said is no longer needed because the federal prison population is declining.

The budget will propose extending the Federal Communications Commission’s authority to auction radio spectrum, a step the White House estimates would save $50 billion.

The president is also planning to propose a 5.2% raise for federal workers, people familiar with the matter said, the largest increase in decades.

Additionally, Mr. Biden is seeking to revive policy initiatives from prior years, including measures to expand child care and fund a universal prekindergarten program. The budget will propose more than $22 billion for HHS’s early-care and education programs, as well as $13.1 billion for Head Start, both increases from last year’s enacted budget levels, White House officials said.

The president will reiterate his call for capping the price of insulin at $35 a month for all Americans, expanding a proposal signed into law last year that imposed the same limit for Medicare recipients.