Industry potentially faces significant expansion of government regulation, despite success in downplaying Democratic proposals
The drug industry has moved on, despite success in downplaying congressional Democrats’ proposals for the most significant expansion of government regulation of drug prices in decades.
The House approved nearly $2 trillion last week social spending and climate bill The president is backed by Biden that requires the government to negotiate prices for some of the older high-cost drugs covered by Medicare. The bill also limits the increase in annual drug prices at the rate of inflation. According to the Congressional Budget Office, the measures reduce federal drug spending and industry revenue by $128 billion over 10 years.
Yet drugmakers avoided proposals that would have been more affected, according to Congressional staff and lobbyists. Industry has yet to force against the bill after it was passed in the House, although some industry executives expect Senate Republicans to derail parts of the package.
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Ilya, the company’s vision-loss drug that accounts for $2.9 billion in Medicare sales in 2019, may be one of the first products to face negotiations. Dr. Schlieffer said he opposed negotiations because low prices could hinder drug manufacturers’ ability to invest in new drug technologies.
The Senate plans to introduce the bill in December. expected to make some changes drug-pricing provision, which was revealed earlier this month in a settlement agreement between Democratic lawmakers, according to people familiar with the matter.
Democrats are seeking to pass the bill through a process called budget reconciliation to bypass the GOP opposition.
The industry’s best chance to dodge the new rules is if Senate Republicans attempt to employ parliamentary procedures to strike the bill as non-budgetary measures, people familiar with the matter said.
After years of bipartisan efforts to rein in drug prices, analysts said the bill would have a relatively limited impact on the industry. Under the proposals, companies will retain the power to set new prices on new products and face negotiations only on drugs that are big sellers long after their launch.
The bill reduces how much senior citizens covered by Medicare have to pay out-of-pocket for prescriptions, which could encourage more use of higher-priced drugs.
“The impact here is very modest,” said Bernstein analyst Ronnie Gall, who forecast an overall reduction in industry revenue of 3% to 5%. “They exchange a year’s increase for a decade of no action at the federal legislative level on drug prices. It’s a pretty good compromise for the pharmaceutical industry.”
This package opens the door for further negotiations on drug prices by the government in future. Industry executives in particular voiced their opposition to the negotiating provision, saying the government has too much purchasing power to be a true negotiator.
Under the bill, a 95 per cent excise tax will be levied on the sale of drugs for which companies refuse to negotiate.
Medicare Price Negotiation Is “Pricing, Apparently” pfizer Inc. PFE -0.37% Chief Executive Albert Boerla said. “The way they think about it, we tell you what the price is, and if you agree it’s fine, if you don’t agree, we’ll give you a 95% fine. I’ll take it as negotiation I don’t see it.”
According to opinion polls, government drug price talks are highly popular among Republican and Democratic voters. Lawmakers on both sides have attacked the cost, but the industry has been successful over the years in stalling legislative proposals.
Recent industry lobbying on the House bill helped the government to back more aggressive proposals to negotiate a larger number of products, according to people familiar with the matter.
The bill directs the Department of Health and Human Services to negotiate prices for 10 drugs starting in 2025 and increase the number of negotiated drugs each year thereafter; By 2030, 100 drugs will have negotiated prices.
Medicare only allows interactions for best-selling drugs that have no normal competition and have been on the market for many years. The most commonly used drugs distributed at local pharmacies, such as the blood thinner Eliquis, are eligible after nine years.
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So-called biological drugs made from living cells, such as the rheumatoid arthritis treatment Humira, have qualified 13 years after launch.
In addition, all insulin products for diabetes are eligible for negotiation, and there is a monthly copy limit of $35 for patients on Medicare and private insurance.
The law would change the calculation of drug-pricing beyond federal programs such as Medicare.
The inflation cap on price increases applies to the entire US drug market, including private and employer health-insurance programs. Any revenue earned from price increases above consumer inflation would be forfeited to the government as a rebate.
This measure will effectively end the practice of large companies using old drugs price hiked To promote revenue growth. Cap Medicare to save $49.4 billion in drug spending over 10 years According to CBO,
In the private sector, the price hike will reduce the overall cost of the drug and reduce insurance premiums for employers, said Paul Massey, head of the CBO’s Medicare Cost Estimates Unit. As a result, according to the CBO, employers will claim fewer tax deductions for their employee health-insurance programs, boosting federal tax revenue by $34.2 billion.
“It is better to place financial rewards on genuine innovation rather than just value addition,” Dr. Schleifer said. “Excessive price hikes are bad for the industry; they give us a bad reputation.”
Lauren Adler, associate director of the USC-Brookings Schaefer Initiative for Health Policy, said drugmakers can respond to the cap by setting higher prices for their newly approved drugs at launch.
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The CBO estimates that five fewer drugs will be introduced over the next 30 years as a result of the bill, out of a total of 1,300 projects that will hit the market.
—Jared S. Hopkins contributed to this article.