If It Ain’t Broke, Don’t Fix It – Are These Prices Really Fair?
A couple of weeks ago the Centers for Medicare & Medicaid Services (CMS) released the prices for the 10 drugs selected under the powers of the Inflation Reduction Act (IRA). President Biden and newly selected Democrat presidential nominee and current Vice President Kamala Harris held a press conference to announce the results of the price “negotiations” between CMS and the manufacturers of the 10 drugs. I put quotes around the word “negotiations” because the process was anything but a negotiation. CMS held all the power, and the drug manufacturers had no option but to accept whatever price CMS determined was “fair” for their drug. You can read a more detailed explanation of why CMS held all the power in these “negotiations” in one of my earlier blogs. This process is really just a price fixing scheme.
So . . . what was the results of these “negotiations”? It’s important to note that all of the prices were cut, not one drug’s price was determined to be correct. They took all the information of the marketplace, the information from the manufacturer, and the value of the drug to the patient and the healthcare system and determined that every one of the drugs was priced too high. The cuts went from a high of 79% to a low of 38% with all but one drug’s price cut at least 50%. These are cuts to the list price which will be an even higher percentage reduction to the net price that the manufacturer ultimately receives. It seems that CMS, and the Biden – Harris administration had a predetermined job they wanted to do, and they did it. They decided:
The process of granting an exclusivity period and streamlining the generic drug application process, which has been in place since the Hatch-Waxman Act in 1984 and has enabled 90% of the drugs taken in the U.S. to be low-cost generics, is now irrelevant.
The drug prices that have resulted in the United States being the world’s source for most of the new drug discoveries are not correct.
The chilling effect of drug price fixing on investment in drug research and development isn’t important.
They are willing to place the political expediency of bragging about taking on “big pharma” above a system that has effectively produced lifesaving and life-changing medicines. A system that saved millions of lives by producing COVID-19 vaccines in unprecedented swiftness isn’t worth preserving. As I’ve said before, it seems to be the government’s job to grab onto a system that is working just fine and trying to fix it. They have no idea what impact this price fixing will have on future prices or future innovation.
These “negotiations,” which started in January 2024, were held in secret, and CMS isn’t required to release the details until March 2025, a month after they announce the next 15 drugs that will have their prices fixed by CMS. This whole scheme is new; it is sure to have unattended consequences and has already impacted R&D expenditures and investment, yet the process barrels forward with no feedback and no recourse, and they want to double down on this unproven approach.
The Biden–Harris press conference was a show of continuity between the outgoing President and his replacement on the ticket. Their goal was to demonstrate that Harris would continue the assault on this healthcare system that has worked for decades. The press release from the White House concerning the announcement of the prices for the 10 drugs said, “The President’s Budget for Fiscal Year 2025 builds on this success by significantly increasing the pace of negotiation, bringing more drugs into negotiation sooner after they launch”. They want to speed up the process and increase the number of drugs subject to price fixing. To make it even more real, Presidential nominee Harris has said she will seek to increase the number of drugs if she is elected, and the Democratic National Committee’s platform put numbers to their promise. They said they support expanding the number of drugs subject to negotiations from 60 in this decade to 500! That’s a ten-time expansion on an unproven program that has the potential for a myriad of unattended consequences, some of which have already started.
There are documented instances of companies delaying or reducing their budgets for research and development due to the uncertainty produced by the price fixing aspects of the IRA. I talked with a small biopharmaceutical company this week that has a great product in phase II testing but is finding it difficult to obtain financing. Insurance companies will be pressured by the rules in the IRA to raise premiums. Drug manufacturers could be pressured to raise the entry price for a new medicine to counter the effects of future price fixing. This intrusive nature of the IRA has a chilling ripple effect on a system that was effectively producing new medicines that saved and improved lives.
I am puzzled by presidential nominee Harris’ stance on not wanting to get between a patient and their doctor. Yet she is willing to not only continue the government's ability to insert itself into Medicare Part D but also support a tenfold increase in that control. Fixing the price of 500 drugs is tantamount to government control of Medicare Part D, which was voted down when the Part D law was passed in 2003.
Fixing the prices of prescription drugs is the government controlling my healthcare. The government has proven to be an inefficient and costly alternative to almost any facet of our life. Part D has had a year-over-year approval rating of 90% by those who use it. If it ain’t broke, don’t fix it.
Best,
Thair