Drugmakers are throwing out the “kitchen sink” to stop Medicare price negotiations

The drug industry, which suffered a stinging defeat last year when President Biden signed a law authorizing Medicare to negotiate prices for some prescription drugs, is now launching a full-scale assault on the measure — just as negotiations were about to begin.

The law, the Decrease Inflation Act, is a signature legislative achievement for Mr. Biden, who has bragged that he took over the drug industry and won it. Medicare is the federal health insurance program for the elderly and disabled; Provisions allowing it to negotiate prices are expected to save the government and Estimated at $98.5 billion More than a decade with lower insurance premiums and out-of-pocket costs for many older Americans.

Tuesday, Johnson & Johnson It became the latest drug company to take the Biden administration to federal court in an effort to end the drug pricing program. Three other pharmaceutical companies – merckAnd Bristol-Myers Squibb And Astellas Pharma — they filed their own lawsuits, as he did Industry’s main trading group and the American Chamber of Commerce.

The lawsuits make similar and overlapping claims that drug pricing provisions are unconstitutional. They’re dotted in federal courts across the country—a tactic that experts say gives the industry a better chance of getting conflicting rulings that would put legal challenges on a fast track to a business-friendly Supreme Court.

This legal push comes just weeks before the Centers for Medicare and Medicaid Services is scheduled to publish a long-awaited list of the top 10 drugs that will be subject to negotiations. The list is scheduled to be published by September 1; The makers of the selected drugs have until October 1 to announce whether they will take part in the negotiations — or face severe financial penalties for not doing so. The lower prices won’t take effect until 2026.

Earlier this month, the chamber asked an Ohio federal judge to issue an injunction barring any negotiations while its case is heard.

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

“The Supreme Court is openly hostile to any perceived violation of the Fifth Amendment,” said Mr. Gostin, adding, “I wouldn’t be at all surprised to see these cases go to the Supreme Court and have them drop them.”

For Biden and his fellow Democrats, it will be a huge 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 Karen Jean-Pierre said in a statement that Biden is confident the administration will win in court.

“For decades, the drug lobby has blocked efforts to allow Medicare to negotiate lower drug costs,” she said. “President Biden is proud to be the first president to defeat them.”

Republicans have opposed drug pricing provisions, which they view as a form of government control over prices. But the politics of the case are treacherous to them. Because so many Americans worry about rising drug prices, it’s hard for Republicans to defend the industry, said Joel White, a Republican strategist with experience in health policy.

Instead, Republicans are focusing on another drug industry priority: scrutiny of the practices of pharmacy benefit managers, who negotiate prices with drug companies on behalf of health plans. Pharmaceutical companies say that by taking the middleman discount, pharmacy benefit managers contribute to the higher cost of prescription drugs.

For drugmakers, the risks of legal challenges are greater than just their business with Medicare, their largest customer. The industry fears that Medicare will, in effect, set the standard for all payers, and that once lower prices are announced to the government, pharmacy benefit managers negotiating on behalf of the insured privately will have more leverage to demand deeper cuts.

In conjunction with its legal campaign, the pharmaceutical industry is launching a PR offensive. The industry trade group that filed one of the lawsuits is the Pharmaceutical Research and Manufacturers Corporation of America, better known as PhRMA Ads run Targeting pharmacy benefit managers, industry executives argue publicly that drug pricing provisions will result in fewer treatments. The implication is clear: lower prices will mean lower revenues, which will discourage companies from developing certain drugs.

“You can’t take hundreds of billions of dollars from the pharmaceutical industry and not expect it to have a real impact on the industry’s ability to develop new therapies and therapies for patients,” said Robert Zirkelbach, PhRMA’s executive vice president. Quote analysis Funding from pharmaceutical company Gilead Sciences, which asserted that the industry stands to lose $455 billion over seven years if companies negotiate with Medicare.

study Released last month Funded by the Biotechnology Innovation Organization, another trade group, it warned that pricing terms would discourage innovation, reducing the number of drug approvals by as much as 139 over the next 10 years.

But that assessment contradicts an analysis by the Congressional Budget Office, which estimated that the law would result in only one fewer drug approvals over a decade and about 13 fewer over the next 30 years.

In addition, many new drugs “do not offer a clinically meaningful benefit over existing drugs,” said Amit Sarpatwari, an expert in pharma policy at Harvard Medical School. He said the Inflation Reduction Act could spur companies to focus more on cutting-edge treatments, rather than so-called drugs, 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 expressly prohibited from negotiating prices directly with drug companies—a condition demanded by the industry in return 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 choose an initial batch of 10 drugs for price negotiations based on how much the Part D program spends on them. More drugs will be added in the coming years.

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

Medicare already pays lower prices for these drugs. In 2021, the latest year for which data is available, Medicare spent about $4,000 per patient on Eliquis and Xarelto, which at the time had sticker prices of $6,000 a year. The lower price reflects discounts extracted from drug makers by pharmacy benefit managers who negotiate on behalf of private companies that contract with the government to administer Part D plans.

But those negotiations are opaque and modestly reduce Medicare spending. The rationale behind the drug pricing provisions of the Inflation Reduction Act is that because Medicare covers so many people, it can use its leverage to extract deeper discounts.

The United States spends more on drugs than comparable countries, in part because other countries proactively control drug prices. Surveys show that many Americans give up taking their medications because they can’t afford them.

Experts say the Medicare negotiation program is likely to translate into direct savings for seniors, initially in the form of lower premiums thanks to reduced spending on drugs. And when lower prices take effect in 2028 for drugs taken in clinics and hospitals under another Medicare program, known as Part B, it could mean lower out-of-pocket costs for seniors covered by the traditional health care system who don’t have supplemental insurance.

In addition to saving money for the government and patients, backers of the inflation bill say, the negotiations will inject much-needed transparency into the complex process of setting drug prices. If the company refuses to negotiate, it must either pay a huge excise tax or withdraw all of its drugs from both Medicare and Medicaid.

“This is not ‘negotiation’,” Merck said in its complaint. “It amounts to blackmail.”

Taken together, the lawsuits present a variety of constitutional arguments. In addition to asserting that the government is violating the Fifth Amendment by unfairly seizing property, they include claims that the law violates the First Amendment by requiring drug companies to agree in writing that they are negotiating a “fair price”. Another argument is that the indirect tax amounts to an excessive fine, which is prohibited by the Eighth Amendment.

“If the government can impose price controls in this way on pharmaceutical companies, it can do the same with any sector of our economy,” said Jennifer Dickey, deputy senior counsel in the chamber’s legal arm.

Biden administration officials say nothing in the law is mandatory. They argue that companies are free not to negotiate and that they can issue news releases or make other public statements that do not agree with the negotiated price. They noted that the government routinely negotiates to purchase other products and that the VA already negotiates drug prices with pharmaceutical companies.

“For me, Medicare is doing what it should be doing,” said Mr. Justin, a professor at Georgetown University. “He’s a huge buyer of a product, and he’s basically using that leverage, that bargaining power, to get the best price.”

He added that the drug industry is “throwing the kitchen sink at the government”. They are looking for what gets stuck, and their arguments are directed directly at the Supreme Court. “