For decades, the drug industry has yelled bloody murder each time Congress considered a regulatory measure that threatened its profits. But the hyperbole reached a new pitch in recent weeks as the Senate moved to adopt modest drug pricing negotiation measures in the Inflation Reduction Act.
According to the Report by Kaiser Health News, the final bill is weaker than earlier versions, which would have extended negotiations to more drugs and included private insurance plans. The bill would enable only Medicare to negotiate prices beginning in 2026, initially for just 10 drugs.
It would save the Centers for Medicare & Medicaid Services about $102 billion over a decade, the Congressional Budget Office estimates. In 2021 alone, the top U.S. pharmaceutical companies booked tens of billions of dollars in revenue: Johnson & Johnson ($94 billion), Pfizer ($81 billion), AbbVie ($56 billion), Merck & Co. ($49 billion), and Bristol Myers Squibb ($46 billion).
The bill authorizes hundreds of millions of dollars for CMS to create a drug negotiation program, setting in motion a system of cost-benefit evaluations like those used in Europe to guide price negotiations with the industry. Americans pay, on average, four times what many Europeans do – and sometimes far, far more – for the same drugs.
The bill does not affect the list prices companies charge for new drugs, which increased from a median price of $2,115 in 2008 to a staggering $180,007 in 2021, according to recent research.
The bill “could propel us light-years back into the dark ages of biomedical research,” Dr. Michelle McMurry-Heath, president of the Biotechnology Innovation Organization, said last month. Venture capitalists and other opponents of the bill said that it “immediately will halt private funding of drug discovery and development.”
Steve Ubl, leader of the ubiquitous Pharmaceutical Research and Manufacturers of America, or PhRMA, called the bill’s Senate passage on Aug. 7 a “tragic loss for patients.” He threatened in an interview with Politico to make politicians suffer if they voted for the measure, adding that “few associations have all the tools of modern political advocacy at their disposal in the way that PhRMA does.”
In the past 12 months, PhRMA and closely allied groups spent at least $57 million – $19 million of it since July – on TV, cable, radio, and social media ads opposing price negotiations, according to monitoring by the advocacy group Patients for Affordable Drugs. PhRMA spent over $100 million this year to unleash a massive team of 1,500 lobbyists on Capitol Hill.
The bill’s champions say that PhRMA’s gloomy prophecies are overblown, and that history is on their side. And some experts argue that Medicare drug pricing negotiations could hasten innovation if they steer companies away from drugs that modestly improve outcomes but can earn massive amounts of cash in the current system of unchecked prices.
Large patient groups such as the American Cancer Society, American Heart Association, and American Diabetes Association, all of which have significant drug industry support, stayed on the sidelines of the debate over the language in the drug price negotiation bill.
Some other patient groups, fearful that the industry will lose interest in drugs for smaller populations should prices decline, opposed the bill – and successfully won exceptions that would prevent Medicare from negotiating prices on drugs for rare diseases.