Big Pharma Prepares for an Assault on Drug Pricing

by Michael London | 03/24/2021 1:04 PM
Big Pharma Prepares for an Assault on Drug Pricing

Democratic leaders are widely expected to advance the infrastructure package, which could be used to place limits on drug launch prices and price hikes.


The pharmaceutical industry is bracing for a hit in Democrats’ next big legislative plan, and the once-untouchable behemoth is scrambling to limit the impact.

House Speaker Nancy Pelosi said that Democrats are talking about incorporating a clause of future infrastructure bills that would enable the government to bargain medication rates. This step would affect pharmaceutical firms but help provides for improved health-care services.

The step would encourage the government to leverage its bargaining power to secure lower Medicare rates with drugmakers. Pelosi quoted Congressional Budget Office projections for a recent bill proposed by Democrats but never approved by Congress that negotiating costs will save the federal government $456 billion over a decade.

“It will be passing up a chance if we could not involve lowering the prices of prescription drugs,” Pelosi said on a conference call hosted by the lobby organization Protect Our Care to mark the 11th anniversary of the Affordable Care Act. “We will save almost half a trillion dollars — nearly $450 billion — which could be used to boost sustainability and access.”


A revived controversy about whether the government should be allowed to negotiate drug pricing, which is vehemently resisted by pharma and Republican politicians, may be a watershed moment for an unaccustomed to losing industry.  The industry survived the Trump period virtually unscathed, even though the previous president sought unusual common ground with Democrats in criticizing rising drug prices.

However, sources associated with the initial talks told POLITICO that Democratic politicians are bent on leveraging their razor-thin legislative majority to eventually drive through a prescription price reform for one simple reason: it is one of the only topics under debate that will save money in a complex package estimated to cost trillions.

“The big distinction in medication premiums and basically anything else out there is because anything else costs resources, and this one saves money,” said Alex Lawson, executive director of Social Security Works, whose organization works closely with congressional staffers on drug pricing.

The pandemic had halted the long-running drug price controversy, which had been propelled by bipartisan public outrage about high prescription prices until it resurfaced last week with two significant developments:

  • House Democrats started debating whether to involve talks in the upcoming infrastructure bill and
  • Sen. Bernie Sanders (I-Vt.), one of the pharmaceutical industry’s most outspoken opponents, unexpectedly called the first hearing on drug pricing in the new Congress for Tuesday.

The news of the hearing jolted several pharma lobbyists, who warned POLITICO that it meant the company might become the infrastructure bill’s “piggy bank.” It also demonstrated the industry’s difficulties in changing its perception from price-gougers to world-savers in the wake of the pandemic.

Pelosi stated that one of her goals in the $1.9 trillion Covid stimulus bill is to find a way to allow permanent higher subsidies for the Affordable Care Act. When talking about other health goals, such as extending Medicare eligibility and adding more neighborhood health centers, she replied, “All is on the table.”

Earlier Tuesday, Senate Budget Chairman Bernie Sanders, along with a host of House senators, launched a much more comprehensive plan to reduce prescription drug costs. Senator Ron Wyden, the Senate Finance Committee chairman, has already personally pledged to “bold” bills to reduce medication costs.

The government will settle premiums for medications and biological goods that do not face competition from generic medicines or biosimilars, as well as insulin, under an earlier House Democratic bill. These drugs’ costs will be capped compared to those in Australia, Canada, France, Germany, Japan, and the United Kingdom, where policymakers regularly bargain with drugmakers and prices are often significantly lower than in the United States.

When the bill reached the House in late 2019, the pharmaceutical lobby fought hard against it. According to federal filings, the Pharmaceutical Research and Manufacturers of America spent $29 million on lobbyists that year, the amount they have previously spent in a single year.

In 2019, the Finance Committee approved a more modest bipartisan Senate effort, but it was not considered on the House. With Democrats in control, it might improve.

Drug producers are still leaving their powder dry. PhRMA spokesperson Brian Newell said companies are “ready to partner with policymakers” to reduce what consumers spend out-of-pocket for medications. And “protect access to narcotics and maintain potential innovation,” referring to business arguments that government talks will result in drugs being withdrawn from patients and reduced spending in research and growth.

Any drug company lobbyists privately stated that they wanted to nudge Democrats into working on a different – and narrower – drug pricing initiative that emerged from the Senate Finance Committee with some bipartisan support last Congress. The bill, by Chair Ron Wyden (D-Ore.) and then-Chair Chuck Grassley (R-Iowa), would not allow mediation but seeks to limit prescription price increases in Medicare and defines seniors’ out-of-pocket expenses, much as the House edition.

Representative Pramila Jayapal (D-Washington), a member of the Congressional Progressive Caucus, has stated that any prescription control law could be more stringent than H.R. 3, which did not apply price hike provisions to private health insurance.

“The ultimate target is for no American to pay more for narcotics than anyone else in any other country,” Jayapal said last month.

The business would not like the bill, and many Republicans have likened its key clause, which targets price growth, to “price controls,” which are anathema to conservative ideology. However, it will have a much lower effect on sector earnings. The Medicare price increase limits will save the federal government around $50 billion, just a quarter of the gains from the House’s negotiating bill.

Earlier Tuesday, a Wall Street analyst downgraded his ratings of six pharmaceutical giants, including GlaxoSmithKline Plc, due to concerns that the company would face stricter oversight under the Biden administration.

“The business and its owners would need to adapt to a new regulatory climate than the one they have enjoyed over the last five years,” SVB Leerink’s Geoffrey Porges said in a note to clients, justifying his decision to lower targets for the stocks to market averages. Porges had ranked the firms as potentially outperforming the industry.


                     Why Is It So Hard to Lower Drug Prices?




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