Seniors will not be surprised that major drug companies across America are suing the federal government to try to block a law developed by the Biden Administration to allow Medicare to be able to negotiate drug prices with manufacturers.
By Al Norman
Seniors will not be surprised that major drug companies across America are suing the federal government to try to block a law developed by the Biden Administration to allow Medicare to be able to negotiate drug prices with manufacturers. The 2003 Medicare Modernization Act, which created the Medicare Part D program, prohibited Medicare from negotiating drug prices. It has taken 20 years to allow Medicare to negotiate.
An industry trade group called the Pharmaceutical Research and Manufacturers of America (PhRMA) is one of several companies that have filed a lawsuit challenging the Constitutionality of negotiation provisions found in President Biden’s Inflation Reduction Act (IRA), which was signed into law in August of 2022. The IRA allows negotiation of drug prices, which through 2031 will save $93 billion, and put an inflation cap on drug prices, which will save another $63 billion.
Additional drug companies also filed separate lawsuits, include Merck and Bristol Myers Squibb, which also claim that the plan is unconstitutional in a variety of ways, including an excise tax that forces manufacturers to accept the government-set price. Their lawsuit says this provision is an “excessive fine,” which violates the 8thAmendment to the Constitution. The U.S. Chamber of Commerce also has its own lawsuit against the new law.
The Biden administration believes it has the legal right to negotiate Medicare drug prices. For many years, activists and lawmakers have argued that Medicare should be able to use its large purchasing clout to drive down drug costs. The White House has stated: “We will vigorously defend the President’s drug price negotiation law, which is already helping to lower health care costs for seniors and people with disabilities. The law is on our side.”
The new Medicare powers are slowly phased in. Medicare will begin negotiating prices for 10 drugs in 2026, then 15 drugs in 2027 and 2028. The number reaches 20 drugs a year by 2029 and beyond. If a medication has been on the market for several years without competition, it is eligible for negotiations.
The first 10 drugs chosen will come from the top 50 Part D drugs that are eligible for negotiation, and that have the highest total expenditures in Medicare. In the first couple of years, Medicare D drugs purchased at pharmacies will be covered, but by 2028 Medicare Part B drugs, which you get through doctors, will be part of the plan. By Labor Day this September, we will know which 10 Part D drugs are negotiable, and once the list is published, the manufacturers will have 30 days to decide if they want to participate in the program.
Drugmakers will be offered a “maximum fair price” by Feb. 1, 2024. If they don’t like the price, they can propose a counteroffer. The negotiations will continue until the end of June, 2024. The final written offer from Medicare will be sent by the middle of July, 2024. The maximum fair price will become public at the start of September, 2024, and the new drug prices will go into effect at the start of 2026. If drugmakers don’t participate in the process, they will be penalized. Manufacturers will pay an excise tax of up to 95% of the medications’ US sales, or their medications will no longer be covered by the Medicare and Medicaid programs.
Stephen J. Ubl, the CEO of PhRMA said during a press conference reported by CNN that regulation will “threaten our industry’s ability to research and develop new treatments and cures. They jeopardize providers’ ability to prescribe the treatments they believe are in the best interest of their patients.”
James Stansel, PhRMA’s general counsel, said at the press conference, ”We are not aware of any program ever established by Congress that gives such unfettered discretion to an agency without any real input from the public, any opportunity on the back end for administrative or judicial review of these decisions as we see here in the IRA price setting provisions. In a statement, PhRMA described the new Medicare power as “replacing market-based prices in Medicare with an entirely new set of prices at Medicare’s own choosing.”
Ironically, the Veterans Administration can buy prescription drugs at discounted prices, and it also negotiates deep discounts on its national drug list. The VA has long been touted as the model for federal negotiation of drug prices. The 1992 Veterans Health Care Act granted the VA minimum discounts on drugs, and set a ceiling on prices drug companies could charge the VA. The Medicaid program, which serves low-income Americans, uses a 1990 Medicaid rebate law, which requires drugmakers to give Medicaid the “best price” they offer.
Despite these drug negotiation precedents, drugmakers filed their injunction to block price caps, and it’s possible their litigation could slow down an already dilatory process that takes years to fully implement, and only for a very limited number of drugs.
Americans pay the highest prescription drug prices of any country in the world. The drug companies are putting their profits ahead of the affordability of drugs for millions of Americans on Medicare. It’s time to tell groups like PhRMA that seniors want Medicare to have the power to limit drug prices, and to negotiate cost.
To protect your rights, contact PhRMA at 202-835-3400 and ask to speak with Customer Service. Tell them: “I’m a senior who is concerned about rising drug prices, and I want PhRMA to drop its injunction against Medicare drug negotiations. Medicare should be able to negotiate on our behalf for affordable medications, like the VA and Medicaid have done for their patients for the past 30 years.”
Al Norman worked in the elderly home care field in Massachusetts for more than 30 years, and has been writing opinion columns for the 50+l Life for almost as long,