The drug industry has been yelling bloody murder every time Congress considers a regulatory measure that could threaten its profits for decades. In recent weeks, however, the hyperbole has reached a new pitch as the Senate adopted modest drug pricing negotiation measures under the Inflation Reduction Act.
The bill “could propel us light-years back into the dark ages of biomedical research,” Dr. Michelle McMurry-Heath, president of the Biotechnology Innovation Organization, said last month. Venture capitalists and other opponentsThe bill stated that it “immediately will halt private funding of drug discovery and development.”
Steve Ubl, leader of the ubiquitous Pharmaceutical Research and Manufacturers of America, or PhRMA, called the bill’s Senate passage on Aug. 7 a “tragic loss for patients.” He threatened in an interview with Politico to make politicians suffer if they voted for the measure, adding that “few associations have all the tools of modern political advocacy at their disposal in the way that PhRMA does.”
In the past 12 months, PhRMA and closely allied groups spent at least $57 million — $19 million of it since July — on TV, cable, radio, social mediaAccording to the monitoring done by Patients for Affordable Drugs, ads that oppose price negotiations were found. PhRMA spent over $100 millionThis year, a massive 1,500-strong team of lobbyists will be on Capitol Hill.
The final bill is weaker that the earlier versions. These would have allowed for more drug negotiations and included private insurance plans. Only Medicare would be able to negotiate prices starting in 2026 for 10 drugs.
It would save the Centers for Medicare & Medicaid Services about $102 billion over a decade, the Congressional Budget Office estimates. In 2021 alone, the top U.S. pharmaceutical companies booked tens of billions of dollars in revenue: Johnson & Johnson ($94 billion), Pfizer ($81 billion), AbbVie ($56 billion), Merck & Co. ($49 billion), and Bristol Myers Squibb ($46 billion).
The bill authorizes hundreds of millions of dollarsCMS can create a drug negotiation plan, setting in motion a system cost-benefit evaluations similar to those used in Europe to guide price negotiations. Americans pay, on average, four times what many Europeans do — and sometimes far, far more — for the same drugs.
The bill will not change the list prices that companies charge for new medicines. They went up from a median price at $2,115 in 2008, to $180,007 in 2021. according to recent research.
The bill’s champions say that PhRMA’s gloomy prophecies are overblown, and that history is on their side.
“It’s complete bullshit and a scare tactic,” Andy Slavitt told KHN. He was a federal health official who tried to change a Medicare program that paid doctors a fixed 6% fee for each drug they administered. This created an incentive to use the most expensive IV drugs. Slavitt claimed that the PhRMA funded most his loud campaign to defeat him.
Another scare tactic used by the drug industry is that any price negotiation could lead to innovation being stopped. Such warnings “constitute the pharma response in literally every instance since 1906,” the year the first drug regulation agency was created, said Dr. Aaron Kesselheim, who leads the Program on Regulation, Therapeutics, and Law at Brigham and Women’s Hospital in Boston. Yet, he said that regulatory changes rarely stop investment in new drugs.
The 1984 bill to increase generic drugs, sponsored by Rep. Henry Waxman (D.Calif.), was derided by the drug industry. Yet while 50% of prescribed drugs were generics in 2000 — up from 15% in 1980 — approvals of important new drugs also soared during the period, Kesselheim noted. He speculated that manufacturers may have been motivated to invest in innovation by the possibility of losing market share to generics.
1993 Thomas Copmann, then a PhRMA vice president, charged that President Bill Clinton’s Vaccines for Children program, which funded vaccinations for any kid whose parents couldn’t afford them, “would just kill innovation because the government would control the market.” Over the next 16 years, childhood vaccination rates climbed — from 72% to around 93% for polio vaccine, for example. The schedule also included new vaccines for hepatitis A/B, pneumonia, chickenpox, and human papillomavirus.
The drug industry’s attacks on regulation have a rich and florid history. The Proprietary Association of America warned newspapers in the early 1900s that they would lose their advertising revenue if the industry listed its ingredients (mostly alcohol). The law passed in 1906, but newspapers — and the drug industry — survived it.
Sometimes the industry’s breast-beating is a negotiating tactic, one that has led to concessions from Congress and the federal government.
In the 1990s, when discussions began about requiring drug companies to pay user fees to have their drugs reviewed, the industry described the fees as a “tax on innovation.” Eventually, it agreed to pay the fees if the FDA set deadlines for the reviews. Over the next five years, drug approvals increased due to an increase in FDA staffing.
Yet “killing innovation” remains a go-to trope. Drug imports, efforts to rein in “pay-for-delay” agreements between brand and generic companies, investigations of price gouging by drugmakers — all, according to conservatives and pharmaceutical executives, “kill innovation.” Former House Speaker Newt Gingrich in 2009 said the sameAbout the Affordable Care Act. The FDA approved new drugs in a golden decade. increasing from 21 in 2010 to 50 in 2021.
Critics of the current bill argue history and economic researchThey show that drug investment will fall when markets shrink. This is what they claim will happen if price controls cause corporations to make less money on blockbuster drugs.
If Medicare negotiations cut into the profits of the biggest earners, investors in risky biotech companies, whose drugs rarely strike it rich, will shift some of their portfolios from pharmaceuticals into other sectors, said Craig Garthwaite, director of health care at Northwestern University’s Kellogg School of Management. “There’s a fair argument as to how much,” he said.
He noted that after Medicare’s drug program was created in 2003 — the drug industry initially opposed it — an increase in federal spending on medicines inspired pharmaceutical companies to spend more on drugs aimed at older people. “Once you invest in clinical trials, that money never comes back unless it’s in revenue for products sold,” he said.
The moribund antibiotics industry demonstrates how shrinking markets — hospitals and doctors intentionally limit the use of new drugs to reduce microbial resistance — lead to lower investment, Garthwaite said.
Experts argue that Medicare drug pricing negotiations could accelerate innovation if they steer companies away form drugs that can modestly improve outcomes, but can still earn huge amounts of cash in the current unregulated system.
According to Dr. Vincent Rajkumar of Mayo Clinic, the majority of investment in cancer drugs is in drugs that offer incremental benefits but at a high cost. He was a principal investigator in two studies. large trials testing Ninlaro (ixazomib), a pill for multiple myeloma that is very similar to the injected drug Velcade (bortezomib). He said that Ninlaro is more convenient but not more effective. It also costs eight times more than generic bortezomib. Xpovio (selinexor), a newer drug for multiple myeloma, keeps patients progress-free for approximately four additional months. It costs $22,000 per month.
Rajkumar, who helped to organize the 2015 International Cancer Conference, said that most of the new cancer drugs only extend life for a short period. letter signed by 118Oncologists argued for Medicare being able to bargain. If forced to negotiate, “maybe the companies would spend their research and development funds on something more meaningful,” he said.
Drug price negotiations are a common practice in other countries with high incomes. “Right now, we are the odd man out,” Rajkumar said. “Are we really that brainy that we are right and everyone else is wrong? Are we really looking out for our public better than everyone else?”
Large patient groups, such as the American Cancer Society and American Heart Association, have been largely absent from the discussion about the drug price negotiation bill’s language.
Some other patient groups, fearful that the industry will lose interest in drugs for smaller populations should prices decline, opposed the bill — and successfully won exceptions that would prevent Medicare from negotiating prices on drugs for rare diseases.
David Mitchell, a multiple myeloma patient who founded Patients for Affordable Drugs in 2017, said he’s sure the bill won’t discourage innovation — and his life may depend on it. The 68-year-old said he’s on a four-drug regimen but “cancer is very clever and finds a way to get around drugs.”
“The idea that taking a small bite out of pharma revenue is going to stop them from creating new drugs is bullshit,” he said.
KHN (Kaiser Health News) is a national newsroom that produces in-depth journalism about health issues. KHN is also part of the three major operating programs. KFF(Kaiser Family Foundation). KFF is an endowed non-profit organization that provides information to the nation on health issues.