Drug companies have profited enormously over several decades from American drug prices that have defied regulation and explanation. Our alleged public servants in Congress have insulated the pharmaceutical industry from many of the inconveniences imposed by competition. While demanding that many sectors of the American economy support and protect free enterprise, the corporations, foreign and domestic, involved in drug development and distribution have been allowed to prosper through laws that allow or promote ‘restraints on trade,’ measures that inflate the costs of widely prescribed drugs.
With many of the drugs introduced in recent years, the basis for their pricing has been how much they can charge without bankrupting the healthcare system, rather than what is a reasonable and profitable charge for the drug they are marketing. The burdens imposed on Medicare by this pricing free-for-all have grown so onerous that they threaten to topple the entire program. Facing an imminent healthcare disaster, our government finally took tentative steps to at least slow the raid on the public treasury that threatens to disable healthcare delivery. That these initial [timid] steps will prove adequate is unlikely.
Although many congressional facilitators supported by the pharmaceutical industry argue that special laws are needed to protect innovation in the drug industry, the wealth generated by these protectionist measures rarely, if ever, produces consequential advances in American healthcare. The Sackler family made billions off their holdings in Purdue Pharma, the manufacturer and distributor of Oxycontin, but even the most cynical politician would not suggest that those billions went to develop safer painkillers or that Oxycontin was a useful medical advance.
With the tie-breaking vote of the current Vice-President, the Senate decided to allow Medicare to ‘negotiate’ the prices of some drugs as part of the Inflation Reduction Act (IRA). This merely conformed to the systems in place in most industrialized nations to prevent price-gouging by drug developers and distributors. As currently drafted, the law mandates a 25% reduction from the original list price of the drugs targeted. The drugs identified for discounting are amongst those most widely prescribed to Medicare recipients and whose original list prices most obviously defied justification.
Although only ten drugs were subjected to this special treatment and only ten or fifteen drugs were slated for similar treatment in future years, the response from the drug lobbyists and pharmaceutical companies was swift and formidable. Lawsuits blocking even this preliminary trickle of government oversight were filed in multiple venues to interfere with the Federal government’s move to restrain out-of-control drug pricing. Legislators dependent on drug industry largesse were quick to draft legislation that would reverse the initiatives to lower drug prices enacted in the Inflation Reduction Act.
Initially the Federal government plans to ‘negotiate’ the price that it will pay for Eliquis, Jardiance, Xarelto, Farxiga, Entresto, Enbrel, Imbruvica, Stelara, Fiasp insulin, and Novolog insulin. Several of these drugs are already familiar to consumers because the drug companies that distribute them spend billions of dollars on advertising and other promotional activities to get patients to request and providers to prescribe these drugs. The success of these promotional campaigns has resulted in these few drugs accounting for 20 % of Medicare part D expenditures.
The mechanism for the proposed negotiations were not spelled out in detail, but given the challenges to the idea of ‘negotiation,’ it is likely that the price tags agreed to will differ little from the current cost of these drugs. Medicare will publish the ‘negotiated’ maximum fair price by September 1, 2024. If the program proceeds as planned, Medicare may save nearly $100 billion over ten years.
If the new prices survive the numerous legal hurdles created by the pharmaceutical industry and challenges from Congress itself, they will still not be put into effect until 2026. The reason drug companies oppose the idea of negotiation is that they have not needed to justify astronomical drug prices in the past. Medicare recipients enrolled in Part D programs faced out-of-pocket charges in the billions of dollars precisely because drug manufacturers held virtual monopoly power in determining what they would charge for their drugs. This power resulted in recent announcements that drugs developed for Alzheimer’s disease, a disease affecting millions of Americans on Medicare, would cost more than $26,000 per patient per year. The potential cost of this medication threatened the viability of Medicare.
Without more support from Congress and the Courts, this entire effort to rein in drug costs will die. Drug costs will continue to spiral out of control, and foreign and multinational drug companies will continue to siphon off vast sums from the American healthcare budget.
Dr. Lechtenberg is an Easton resident who graduated from Tufts University and Tufts Medical School in Massachusetts and subsequently trained at The Mount Sinai Hospital and Columbia-Presbyterian Medical Center in Manhattan. He worked as a neurologist at several New York Hospitals, including Kings County and The Long Island College Hospital, while maintaining a private practice, teaching at SUNY Downstate Medical School, and publishing 15 books on a variety of medical topics. He worked in drug development in the USA, as well as in England, Germany, and France.