By Bill Johnston
The Inflation Reduction Act passed the Senate 51-50 on Aug. 7, 2022 with all 50 Democratic senators voting in favor and Vice President Kamala Harris stepping in to cast the tie-breaking vote in her dual role as Senate president. No Republican senators supported passage of the policy package.
Similarly in the House of Representatives, all Democratic representatives voted in favor and all members of the opposing party voted against, with the final count at 220-207.
The Act reduces costs in many different areas, including Healthcare. Specifically, the new law limits out-of-pocket drug expenses for Medicare seniors to $4,000 annually in 2024 and $2,000 annually in 2026 and caps the monthly insulin supply for Medicare recipients beginning 2024 at $35.
The law also imposes penalties on drug companies if they increase their prices faster than inflation and extends Affordable Care Act subsidies to 2025.
This article focuses on perhaps the most important portion of the Act which allows Medicare to finally negotiate with drugmakers on prescription drug prices. Previously, Medicare was prohibited from negotiating drug pricing.
President Biden signs the Inflation Reduction Act of 2022 in the State Dining Room of the White House
Under the law, Medicare is allowed to negotiate prices for just a limited number of high-cost drugs. The government is expected to publish a list of the first 10 Medicare Part D drugs selected for negotiation in September 2023, according to the Centers for Medicare and Medicaid Services (CMS). The new prices will be effective in 2026.
In future years, the government will select up to 15 more Part D drugs for 2027, up to 15 more Part B or Part D drugs for 2028, and up to 20 more Part B or Part D drugs for each year after that.
Among the factors CMS will consider when developing its initial offer are the clinical benefits of the selected drugs – including whether it fills an unmet medical need in a specific population – and the price of therapeutic alternatives, such as other drugs in the same class. Drug manufacturers will be allowed to counteroffer the price offered by Medicare.
The Congressional Budget Office (CBO) has estimated the negotiation program, along with other drug provisions included in the Inflation Reduction Act, will reduce the federal deficit by $237 billion over 10 years.
For the first time, Medicare has the ability to negotiate lower prescription drug prices administered in doctors’ offices or purchased at the pharmacy thanks to the law. The new drug price negotiation program aims to lower prices for seniors, promote competition in the market and strengthen Medicare.
However, as expected, not only the Republican Party but also pharmaceutical companies and the Chamber of Congress have already started attempts to kill the Act.
Among the fiercest critics prior to the legislation passing was the pharmaceutical industry, which spent more than $375 million to lobby but failed to block Congress from granting the government new powers.
As expected, pharmaceutical giants have quickly filed an early blitz of legal challenges to the plan. Merck has sued the US government claiming the provision is unconstitutional and threatens to stifle the industry’s future investments in cancer treatments and other drugs.
Merck argues the drug price negotiation program is not the right approach; “By coercing Merck to provide its drug products at government-set prices, the program takes property for public use without just compensation in violation of the Fifth Amendment.” the company said in a statement.
Merck’s complaint also argues the law violates the First Amendment by requiring “manufacturers to convey they ‘agree’ to the Department of Health and Human Services (HHS) ‘fair’ prices.” “Conscripting companies to legitimize government extortion is the sort of parroted orthodoxy that the First Amendment’s compelled-speech doctrine forbids,” the complaint says.
In response to the lawsuit, Xavier Becerra, secretary of the HHS, said “We’ll vigorously defend the President’s drug price negotiation law, which is already lowering health care costs for seniors and people with disabilities.”
The U.S. Chamber of Commerce - whose dues-paying members include drugmakers AbbVie and Eli Lilly - has also brought a lawsuit to block Medicare from bringing the program online.
The latest broadside arrived last week when Bristol Myers Squibb sued the Biden administration over its forthcoming program to lower prescription drug prices for seniors.
In its lawsuit, Bristol Myers Squibb argued the negotiation process violates the company’s constitutional rights, particularly by forcing it to sell its medicines at steep discounts. The company earned $46.2 billion in revenue last year, including about $11 billion from Eliquis, one of the drugs that could be targeted for Medicare negotiation.
In a separate statement, Bristol Myers Squibb said the Inflation Reduction Act had “changed the way we look at our development programs,” particularly for cancer drugs. It added any haggling with the government would harm “millions of patients who are counting on the pharmaceutical industry to develop new treatments.”
I’m left wondering, how did we, the voters, ever allow no price negotiations, let alone be this close to allowing this law to be overturned?
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