Senate advances drug pricing negotiations
Democrats approve of restrictions for health insurance plans, but not for commercial drug coverage.
Despite strong opposition from biopharmaceutical manufacturers, Senate Democrats pushed through legislation allowing Medicare to negotiate prices for certain drugs and limit spending for seniors with high drug costs. The $740 billion Inflation Reduction Act (IRA) of 2022 also extends health insurance subsidies provided under the Affordable Care Act (ACA) for an additional three years.
These provisions are part of the abroad package of energy and fiscal policy reforms designed to fight global warming and increase taxes for corporations and wealthy individuals. Republicans unanimously rejected the entire package, especially tax provisions and drug price controls, describing the Democrats’ plan as inflationary and fiscally irresponsible. The House is expected to vote on the bill later this week to seal this important political victory for the Biden administration. Democrats control that body by only a narrow margin, setting the stage for a very close vote in the face of stiff Republican opposition.
The bill’s prescription drug provisions will largely affect adults over 65, as Senate rules have blocked some cost controls from applying to people who obtain health insurance through the ‘use. The bill also removes penalties for drug companies that raise prices above inflation each year for commercial plans as well as a policy capping patient insulin spending at $35 per month for consumers. . Many plans already have limits on insulin costs, but high prices for this essential drug have become a hot issue.
However, in a boon for health plans and consumers, the legislation delays premium increases for some 13 million people who currently enjoy discounted coverage for health insurance provided through health exchanges. State and Federal Obamacare. Broader subsidies were authorized during the COVID-19 pandemic and are set to expire this year without the additional $64 billion authorized here to continue premium cost reductions for three more years.
However, the changes affecting Medicare drug benefits are significant. The legislation would cap out-of-pocket drug costs for Medicare beneficiaries at $2,000 a year starting in 2025, a provision that could benefit more than 1 million seniors, possibly up to 3 million as that more expensive therapies will come to market. Pharmaceutical companies would also have to pay large “rebates” or fees to the government if they raise Medicare drug prices above the rate of inflation. And insulin costs would be capped at $35 per month for seniors.
Most notable is the provision allowing Medicare price negotiations for some expensive drugs, the holy grail of health-benefit reform for many Democrats for decades. Starting in 2026, this highly controversial provision will allow Medicare to negotiate the prices of 10 expensive and widely used drugs close to patent expiration, expanding to 20 drugs per year by 2029. If the manufacturer rejects the price of Medicare, he would pay high fees to the program, a process the industry attacks as closer to price control than negotiation.
One thing is certain, there will be considerable maneuvering between biopharmaceutical companies over which drugs will be put on the price negotiation list as the new program comes out.
The Pharmaceutical Research and Manufacturers of America (PhRMA) led a massive assault on the proposal, with non-stop TV and radio ads predicting long-term harm to patients and the healthcare system. Likewise, the Biotechnology Innovation Organization (BIO) maintained a steady stream of warnings that Medicare drug regulation would limit access to many important drugs and result in fewer new treatments for patients. PhRMA President Steven Ubl suggested the industry could take legal action to block negotiations and challenge new rules and other features as Medicare moves to implement the new policy.
Less visible were the generic drug industry’s similar objections to Medicare price negotiations. The Association for Accessible Medicines (AAM) pointed out that likely brand name candidates for spending limits will be expensive, widely used drugs just as they become eligible for generic competition. However, negotiations that lower list prices will leave less room for generic manufacturers to offer low-cost alternatives that are profitable, and very little incentive for more copycats to enter the market. In addition, Medicare drug plans will have little incentive to give favorable formulary placement to slightly cheaper generics. Biosimilar makers have raised similar issues, as negotiations to lower prices for expensive biotech therapies will make it harder for competing successors to gain market share and become profitable.
Additionally, it is unclear how these new policies will affect state Medicaid programs. Curbs to annual drug price increases for Medicare could drive up prices for other public and private plans. New pricing policies may result in higher introductory prices for new therapies, change how formularies cover brand-name and generic products, and change the design of Medicare Part D drug plans and commercial coverage .
Another unknown is the impact of changes in coverage and pricing policy on investment and innovation in the biopharmaceutical industry. Pharmaceutical and biotech manufacturers have loudly predicted that limits on prescription drug revenues resulting from forced negotiations will dampen incentives to invest in R&D, especially in new biotech companies, reducing jobs and discovery of many life-saving drugs. Some health analysts dismiss the dire results, saying innovation will continue as the new program spur competition and benefit Americans more broadly.
About the Author
Jill Wechsler is the managing editor in Washington for BioPharm International.