Drugmakers vs. Medicare: Price Negotiations Showdown

Drugmakers vs. Medicare: The pharmaceutical industry is fighting the government’s Medicare drug price negotiations in a contentious legal battle that could change US drug pricing. Drugmakers are furious at President Biden’s Inflation Reduction Act, which has sparked a wave of lawsuits and a multifaceted campaign to overturn it.

Last year, President Biden signed the Inflation Reduction Act, which allows Medicare, the federal health insurance program for older and disabled Americans, to negotiate prescription drug prices. The law aims to lower drug prices, which have long plagued millions of Americans.

Medicare’s drug price negotiation provisions could lower seniors’ and vulnerable populations’ insurance premiums and out-of-pocket costs by $98.5 billion over ten years.

The pharmaceutical industry is launching a massive counterattack as the government prepares to release the first ten drugs for negotiations. J&J, Merck, Bristol Myers Squibb, and Astellas Pharma have sued the Biden administration. PhRMA and the U.S. Chamber of Commerce are also involved.

The lawsuits allege that drug pricing provisions are unconstitutional, setting up a fierce legal battle. The pharmaceutical industry hopes to get conflicting rulings from multiple federal courts to take the case to the U.S. Supreme Court, where they think they’ll win.

Drug industry lawsuits involve several constitutional issues. The Fifth Amendment prohibits the government from taking private property without just compensation. Drugmakers say the law’s price-negotiating requirement violates their property rights.

Georgetown University public health law expert Lawrence O. Gostin says the Supreme Court has shown hostility toward Fifth Amendment violations. This suggests that these cases could reach the Supreme Court, which could change drug pricing for years.

Drugmakers vs. Medicare
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President Biden and Democrats, who prioritize drug price reduction, face a crucial legal battle. Any ruling against the government’s drug price negotiations could hurt their efforts and become a Republican campaign issue in 2024.

The Biden administration remains confident in its legal position despite legal challenges. Karine Jean-Pierre, White House press secretary, reiterates President Biden’s commitment to fighting the pharmaceutical lobby and lowering healthcare costs for all Americans.

Given public concern over rising drug prices, Republicans are in a difficult position. This political conundrum strengthens the pharmaceutical industry’s multi-pronged legal strategy.

Republicans are now investigating pharmacy benefit managers (PBMs), which negotiate drug prices for health plans. Drugmakers have long blamed PBMs for driving up prescription drug prices by taking a cut.

Pharmaceutical companies are also waging a PR war. PhRMA, the industry’s trade group, is advertising to pharmacy benefit managers, while executives argue that the pricing provisions will slow drug development and reduce cures.

The pharmaceutical industry worries that the government’s lower drug prices will affect all payers beyond Medicare’s negotiations. Once public, these lower prices could give pharmacy benefit managers more leverage to demand deeper discounts for the privately insured, reducing drug companies’ revenues.

However, Inflation Reduction Act supporters argue that the negotiations will bring drug pricing transparency. Medicare’s purchasing power helps the government negotiate deeper discounts that lower seniors’ premiums and out-of-pocket costs.

The Congressional Budget Office estimates that the law would delay drug development and innovation by only one drug over a decade and 13 over 30 years.

Before the Inflation Reduction Act, Medicare could not negotiate drug prices directly with manufacturers. The government will reveal the first ten drugs to negotiate based on Part D program spending. The list will likely grow.

Eliquis, Xarelto, Imbruvica, Xtandi, Symbicort, and Enbrel will likely be the first drugs negotiated.

Pharmacy benefit managers negotiate lower drug prices for Medicare. Using the government’s extensive coverage, the law seeks even greater discounts.

The Inflation Reduction Act’s supporters say the negotiations will lower seniors’ premiums and out-of-pocket costs. In 2028, the law for drugs administered in clinics and hospitals under Medicare Part B will reduce costs for seniors without supplemental insurance.

Due to the high excise tax on non-negotiators, the pharmaceutical industry calls the Act extortion. Critics say the excise tax is an excessive fine, but the Biden administration says companies can publicly disagree with the negotiated price.

This high-stakes legal battle is uncertain as the pharmaceutical industry supports the legal challenges. The industry-government conflict could affect millions of Americans who rely on prescription drugs. Both sides are arguing harder, so the courts will decide drug pricing in the US.


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