After the Senate passed a major drug pricing reform Sunday, pharma companies are likely readying their legal slings and arrows. Meanwhile, industry watchers remain divided on the bill’s pros and cons.
Alongside climate and tax measures, Sunday’s Congressional package includes provisions that give Medicare the power to slash drug prices and cap out-of-pocket spending for seniors. The bill, which still needs to go through the House to become law, also requires drugmakers to pay a Medicare rebate if their prices rise faster than the rate of inflation.
Even if the bill passes muster in the House this week as expected, the drug price measures will only take effect once the U.S. Department of Health and Human Services rolls out regulations on their execution. At that point, pharma companies would be free to sue.
It isn’t so much a question of if drugmakers will mount a legal counterpunch to the legislation, but when and how.
The House passing the Inflation Reduction Act (IRA) of 2022 would be “just the beginning, rather than the end, of developments over Medicare drug price negotiation,” Rachel Sachs, a law professor at the Washington University in St. Louis, wrote in a HealthAffairs summary of the bill’s drug pricing elements.
The pharma industry has suggested it’s likely to sue to challenge the law, Sachs explained. Further, the industry could angle to influence the rulemaking process and sue to challenge the Center for Medicare and Medicaid Services’ (CMS’) rollout of regulations. Finally, the industry “is likely to attempt to ‘game’ the negotiation process itself,” Sachs continued.
None of this should come as a shock, she added, citing the pharma industry’s historical litigiousness when it comes to “even the most moderate price transparency laws.” The industry has a long history of leveraging patent thickets, pay-for-delay agreements, product hopping and more to keep hold of their product monopolies.
“It would be surprising if this behavior stopped with the enactment of drug price negotiation legislation,” Sachs said.
Still, the measures—despite their limitations—could change the way Medicare pays for drugs, potentially cutting costs for millions of seniors who struggle to afford their prescriptions, Sachs said.
In recent weeks, scores of executives from some of the industry’s biggest companies—plus trade groups such as the Pharmaceutical Research and Manufacturers of America (PhRMA)—have railed against the proposed legislation. PhRMA President and CEO Stephen Ubl on Sunday called the Senate’s decision a “tragic loss for patients” based on a “litany of false promises.”
In one common industry refrain, executives and others have argued that the bill doesn't provide for back-and-forth "negotiations." Instead, since the bill authorizes harsh financial punishments against companies for not complying with Medicare's pricing offers, industry advocates say the bill introduces "price controls."
In a separate email to Fierce Pharma, PhRMA spokesperson Brian Newell said the organization remains “concerned that that the reconciliation bill passed by the Senate fails to help address many of the real affordability challenges facing patients.” PhRMA wants Congress to set its sights on the “unfinished business” of lower cost sharing for patients and pharmacy benefit manager reform, he added.
PhRMA is also weighing ways to counter the bill.
“While it’s premature to speculate before the bill has passed, we will explore every opportunity—including legislative, regulatory and legal—to make sure patients have access to the medicines they need and our industry can continue to develop lifesaving cures and treatments,” added another PhRMA spokesperson, Sarah Sutton.
Some drug pricing experts are more positive on the bill, which they see as an actual stab at price reform following years of lawmaker bluster and bravado.
Stacie Dusetzina, Ph.D., associate professor of health policy and Ingram associate professor of cancer research at Vanderbilt University School of Medicine, said in an email that the measures "are good for Medicare beneficiaries and for taxpayers who fund the Medicare benefit."
“Though some are disappointed that these provisions apply only to Medicare, it is important to realize that this bill substantially improves the health benefits for 48 million people in our county,” she added. “I think that is a really big deal.”
The industry has long argued the move could stifle innovation, but some experts, such as Loren Adler, associate director of the University of Southern California-Brookings Schaeffer Initiative for Health Policy, say those fears are overblown.
The bill’s effect on new drug development “should be somewhat muted,” Adler said. That’s “both because new drugs can offset some (but not all) of the law’s effect on prices by launching with a higher list price than they otherwise would have and because negotiated prices cannot kick in until the drug has already been on the market for 9 to 13 years, at which point many drugs would have already begun facing generic competition.”
The reconciliation bill is set to go before the House on Friday. The legislation would allow Medicare to set prices for 10 medicines in 2026, with the number growing to 60 by 2029, analysts with SVB Leerink wrote in a recent note to clients. In 2026 and 2027, Medicare would only control Part D drug prices, but in 2028, it could also negotiate prices in Part B, the analysts said.
https://www.fiercepharma.com/pharma/senate-passed-major-drug-pricing-reform-sunday-are-industry-lawsuits-next
