Drug makers ‘throw the kitchen sink’ to stop Medicare price negotiations

Drug makers 'throw the kitchen sink' to stop Medicare price negotiations

The pharmaceutical industry, which suffered a crushing defeat last year when President Biden signed legislation authorizing Medicare to negotiate the price of some prescription drugs, is now waging a broad-based attack on the measure — just as negotiations are about to begin.

The legislation, the Inflation Reduction Act, is a signature legislative achievement for Mr Biden, who has claimed he took on the pharmaceutical industry and won. Medicare is the federal health insurance program for the elderly and disabled; Provisions allowing price negotiation are expected to save the government estimated $98.5 billion Insurance premiums and out-of-pocket costs have decreased for many older Americans in more than a decade.

on Tuesday, Johnson & Johnson The drug maker became the latest to take the Biden administration to federal court in an effort to halt the drug pricing program. Three other pharmaceutical companies – merck, Bristol Myers Squibb And Astellas Pharma – as if they filed their own lawsuits main business group of the industry And this US Chamber of Commerce,

The lawsuits make similar and overlapping claims that the drug pricing provisions are unconstitutional. They are scattered in federal courts across the country — a strategy experts say gives the industry a better chance of getting conflicting decisions that will move legal challenges to the business-friendly Supreme Court faster.

The legal push comes weeks before the Centers for Medicare and Medicaid Services is scheduled to publish a long-awaited list of the first 10 drugs that will be subject to negotiation. The list will be released by September 1; The makers of the selected drugs have until October 1 to announce whether they will participate in the talks – or face heavy financial penalties if they do not. The lower prices won’t take effect until 2026.

Earlier this month, Chambers asked a federal judge in Ohio to issue an injunction that would block any conversation during the hearing of his case.

Georgetown University public health law expert Lawrence O. Gostin said the Supreme Court may be sympathetic to some of the industry’s arguments. In particular, he pointed to a claim by drug manufacturers that by requiring them to negotiate or pay fines, the law violates the Fifth Amendment’s prohibition on taking private property for public use without reasonable compensation.

“The Supreme Court is openly hostile to any alleged violation of the Fifth Amendment,” Mr. Gostin said, adding, “I would not be at all surprised to see these cases go all the way to the Supreme Court and have them strike it down.”

For Mr. Biden and his fellow Democrats, it will be a painful blow. The president and Democrats have long campaigned to lower drug prices and plan to make it a central theme of their 2024 campaigns. White House press secretary Karin Jean-Pierre said in a statement that Mr Biden was confident the administration would win in court.

“For decades, the pharma lobby has blocked efforts to let Medicare negotiate lower drug costs,” he said. “President Biden is proud to be the first president to defeat him.”

Republicans oppose drug pricing provisions, which they consider a form of government price control. But the politics of the issue is treacherous for him. Joel White, a Republican strategist specializing in health policy, said because so many Americans are concerned about high drug prices, it is difficult for Republicans to come to the defense of the industry.

Instead, Republicans are focusing on another priority of the drug industry: investigating the practices of pharmacy benefit managers, who negotiate prices with drug companies on behalf of health plans. Drug companies say pharmacy profit managers with the help of middlemen are contributing to the high cost of prescription drugs.

For drugmakers, the risk of legal challenges is even bigger than their business with Medicare, their largest customer. The industry fears that Medicare will, in effect, set the standard for all payers, and that once the government’s low prices become public, pharmacy benefit managers negotiating privately on behalf of the insured will have more leeway to demand deep discounts.

Along with its legal campaign, the pharmaceutical industry is waging an aggressive public relations campaign. The industry trade group that filed a lawsuit, the Pharmaceutical Research and Manufacturers of America, known as PhRMA, is running ads Targeting pharmacy profit managers, and industry executives are publicly arguing that drug pricing provisions will lead to fewer cures. The implication is clear: Lower prices would mean less revenue, which would discourage companies from developing certain drugs.

“You cannot take hundreds of billions of dollars out of the pharmaceutical industry and expect it to have a real impact on the industry’s ability to develop new treatments and cures for patients,” said Robert Zirkelbach, PHRMA executive vice president. he cited an analysis Funded by drug maker Gilead Sciences, which claimed the industry would lose $455 billion over seven years if companies negotiated with Medicare.

one discovery released last month It was funded by another trade group, the Biotechnology Innovation Organization, which warned that the pricing provisions would discourage innovation, resulting in 139 fewer drug approvals over the next 10 years.

But that assessment contrasts with an analysis by the Congressional Budget Office, which estimated that the law would result in approval of just one fewer drug a decade and about 13 fewer drugs over the next 30 years.

In addition, many new drugs “are not providing a clinically meaningful benefit compared to existing drugs,” said Amit Sarpatwari, an expert in pharmaceutical policy at Harvard Medical School. The Inflation Reduction Act could encourage companies to focus more on breakthrough treatments rather than so-called me-too drugs, he said, because the law requires the government to consider the clinical benefit of drugs in determining the price Medicare will pay for them.

Until now, Medicare has been explicitly barred from negotiating prices directly with drugmakers—a condition the industry sought in exchange for supporting the creation of Part D, the Medicare prescription drug program, which was signed into law 20 years ago by President George W. Bush.

Under the Inflation Reduction Act, the government will select an initial set of 10 drugs for price negotiation based on how much the Part D program spends on them. More drugs will be added in the coming years.

experts expect The initial list of drugs will include frequently prescribed drugs such as the blood thinners Eliquis and Xarelto; cancer drugs like Imbruvica and Xtandi; Symbicort, which treats asthma and chronic obstructive disorders; and Enbrel, for rheumatoid arthritis and other autoimmune disorders.

Medicare already pays the discounted price for those drugs. In 2021, the most recent year for which data is available, Medicare spent about $4,000 per patient for Eliquis and Xarelto, which at that time had sticker prices of $6,000 a year. The lower prices reflect the rebates taken from drug manufacturers by pharmacy benefit managers negotiating on behalf of private companies that contract with the government to administer Part D plans.

But those negotiations are opaque and reduce Medicare spending only marginally. The reasoning behind the drug pricing provisions of the Inflation Reduction Act is that since Medicare covers so many people, it can use its leverage to get even more rebates.

The United States spends more per capita on drugs than comparable countries, partly because other countries actively regulate drug pricing. Surveys show that many Americans stop taking their medications because they cannot afford them.

Experts say the Medicare negotiation program is likely to translate into direct savings for seniors, initially in the form of lower premiums, made possible by lower drug costs. And when lower prices for drugs administered in clinics and hospitals go into effect in 2028 under another Medicare program, known as Part B, it could mean lower out-of-pocket costs for seniors covered by traditional Medicare who don’t have supplemental insurance.

Proponents of the Inflation Reduction Act say that in addition to saving money for the government and patients, the negotiation would bring much-needed transparency to the complex process of setting drug prices. If a company refuses to negotiate, it must either pay a hefty excise tax or withdraw all of its drugs from both Medicare and Medicaid.

“This is not a ‘negotiation,'” Merck said in its complaint. “It’s tantamount to extortion.”

Overall, the lawsuits make a variety of constitutional arguments. In addition to claims that the government is violating the Fifth Amendment by taking property unjustly, they include claims that the law violates the First Amendment by forcing drug companies to agree in writing that they are negotiating a “fair price”. Another argument is that the excise tax amounts to an excessive fine, which is prohibited by the Eighth Amendment.

“If the government can impose price controls like this on drug companies, it can do the same for any sector of our economy,” said Jennifer Dickey, deputy chief counsel for the chamber’s legal branch.

Biden administration officials say nothing in the law is mandatory. They argue that companies are free not to negotiate and can issue news releases or make other public statements disagreeing with the negotiated price. And he noted that the government regularly negotiates to purchase other products and that the Department of Veterans Affairs already negotiates drug prices with drug companies.

“To me, Medicare is doing what it should be doing,” said Mr. Gostin, the Georgetown professor. “It’s a big buyer of a product, and it’s basically using that influence, that bargaining power, to get the best price.”

“The pharmaceutical industry is accusing the government,” he said. “They are looking for a what-if, and their arguments are aimed directly at the Supreme Court.”

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