Historic New Power Under Fire
The
controversial program was authorized by the Inflation Reduction Act that Democrats
pushed through Congress last year. The drug industry and their supporters, however,
are determined to quash the effort, filing at least eight lawsuits in recent weeks
declaring it unconstitutional.
Undaunted, the Centers for Medicare and Medicaid
Services has forged ahead with its historic new power, which Democrats have long
argued is a way to lower drug prices.
In his Tuesday remarks, Biden highlighted his other
efforts to lower health care costs. The Inflation Reduction Act also caps the
monthly cost of insulin at $35 for Medicare enrollees, allows seniors to get more
vaccines at no charge and penalizes drugmakers that raise prices higher than
inflation. Other provisions kick in in coming years.
What Happens Next
The initial set of
drugs was chosen from the top 50 eligible Part D drugs that have the highest total
expenditures in Medicare. Only medications that have been on the market for several
years without competition are eligible.
The first 10 drugs accounted for $50.5 billion, or
about 20%, in total Part D gross covered prescription drug costs, between June 1,
2022, and May 31, 2023, which is the period used to determine which drugs were
eligible for negotiation, according to HHS.
CMS will consider multiple factors when developing its
initial offer, including the drugs’ clinical benefits, the price of alternatives,
research and development costs and patent protection, among others. The discounts
will range from at least 25% to 60% off the nonfederal average manufacturer price,
depending on when the drugs were approved.
Drugmakers have a month to decide whether to
participate. CMS and the manufacturers will then negotiate, and the agency will
publish the agreed-upon maximum fair prices by September 1, 2024.
If drugmakers
don’t comply with the process, they will have to pay an excise tax of up to 95% of
the medications’ US sales or pull all their products from the Medicare and Medicaid
markets. The pharmaceutical industry contends that the true penalty can be as high
as 1,900% of sales.
After the initial round, the Health and Human Services
secretary can negotiate another 15 drugs for 2027 and again for 2028. The number
rises to 20 drugs a year for 2029 and beyond.
In the first two years of negotiations, CMS will select
only Part D drugs that are purchased at pharmacies. It will add Part B drugs, which
are administered by doctors, to the mix for 2028.
Nearly $100 billion in savings
predicted
The program is expected to save Medicare $98.5 billion over
10 years, according to the Congressional Budget Office.
The extent of the savings remains to be seen, with the
pharmaceutical industry arguing that many of the medications on the list already
have large rebates and discounts due to negotiations that currently occur in Part D
insurance plans.
But some experts say Medicare’s new power will make a
difference.
“It’s pretty obvious that there are huge savings to be
had here, for even a small number of drugs,” said Dr. Benjamin Rome, a health policy
researcher at Brigham and Women’s Hospital and Harvard Medical School.
While he said it’s harder to pin down the extent of the
savings for Medicare enrollees taking the drugs on the list, Rome noted that the
overall savings can help lower premiums and reduce the amount of taxpayer support
needed for Medicare.
Asked how much enrollees will save from the
negotiations, CMS Administrator Chiquita Brooks-LaSure told CNN that other
provisions of the Inflation Reduction Act will have a big impact on patients’
spending. She highlighted the upcoming $2,000 cap on annual out-of-pocket costs in
Medicare Part D, which takes effect in 2025.
Being able to negotiate drug prices
will improve Medicare’s finances, Brooks-LaSure said.
“Negotiation is part of the
strategy to make sure that Medicare is sustainable,” she told CNN.
Advocates Also Cheered the Unveiling of the
List.
“The number one reason seniors skip or ration their
prescriptions is because they can’t afford them. This must stop,” said Nancy
LeaMond, chief advocacy and engagement officer for AARP.
“Allowing Medicare to negotiate prices for these first 10
drugs will finally bring much needed access and relief to American families,
particularly older adults. We cannot overstate how monumental this law is for older
Americans’ financial stability and overall health.”
Drugmakers’ Court
Challenges
Manufacturers, however, hope to halt the negotiation
process, filing multiple lawsuits in federal courts across the US. They each contend
that the program is unconstitutional in various ways.
Many of the drugs on the list are made by
pharmaceutical companies that are suing the administration. They include: Eliquis, a
blood thinner manufactured by Bristol Myers Squibb; Januvia, a diabetes drug made by
Merck; Imbruvica, a leukemia drug made by Janssen Pharmaceuticals, which is owned by
Johnson & Johnson; Xarelto, a blood thinner marketed in the US by Janssen;
Stelara, a Janssen drug used for Crohn’s disease and other conditions; Jardiance, a
diabetes medication made by Boehringer Ingelheim; and Farxiga, a diabetes drug
manufactured by AstraZeneca. Some of the medications were co-developed by other drug
companies that have not filed lawsuits.
Among the arguments are that the program violates the
Fifth Amendment’s “takings” clause because it allows Medicare to obtain
manufacturers’ patented drugs, which are private property, without paying fair
market value under the threat of serious penalties.
Plus, the negotiations process violates the First
Amendment, the challengers say, because it coerces manufacturers into saying that
they agree to the price that the government has dictated and that it’s fair.
Another argument is that the process violates the
Eighth Amendment by levying an excessive fine if drugmakers refuse to negotiate and
continue selling their products to the Medicare market.
PhRMA, the drug
industry’s main lobbying group, said that Tuesday’s announcement “is the result of a
rushed process focused on short-term political gain rather than what is best for
patients.”
“Giving a single government agency the power to
arbitrarily set the price of medicines with little accountability, oversight or
input from patients and their doctors will have significant negative consequences
long after this administration is gone,” the group said in a statement, adding that
the White House’s Cancer Moonshot, an important initiative for Biden, will be
hobbled by the harm done to innovation.
In a blog post last week, PhRMA contended that seniors
may not benefit and could see their access to their medicines restricted by their
Part D drug insurance plans. Also, it said the program ignores the current savings
from negotiation and competition that exist in the Part D benefit. And finally, it
said the program will curtail research and investment in future drug development.
The CBO estimates that only about 15 fewer drugs would be
introduced over the next 30 years, but the pharmaceutical industry argues the true
number would be much higher.
The US Chamber of Commerce, which also filed a lawsuit
and is seeking a preliminary injunction to halt the process, called the White
House’s celebration “premature.”
“The scheme that they are implementing is under a
significant cloud of legal uncertainty,” said Neil Bradley, the chamber’s chief
policy officer. “All of this could be unwound on the basis that the fundamental
program is unconstitutional, and that in the implementation, they’re violating the
Administrative Procedures Act.”
The Biden administration, however, has said that
nothing in the Constitution bars it from negotiating drug prices. Legal experts have
generally agreed.
“Although drug companies are attempting to block
Medicare from being able to negotiate for better drug prices, we will not be
deterred,” Secretary of Health and Human Services Xavier Becerra said in a statement
on Tuesday.
Source: https://edition.cnn.com/2023/08/29/politics/medicare-drug-price-negotiations/index.html
