By Peter Galvin, MD

If you are a reader of my columns, then you know that I have previously mentioned that the USA is one of only a handful of countries that does not regulate drug prices (see “Ask the Doc” 12/28/23). Late last year, that began to change, at least for Medicare and Medicaid. When Congress created Medicare Parts A and B in 1965, it did not include drug price negotiations. The Inflation Reduction Act (IRA) of 2022 authorized the Centers for Medicare and Medicaid Services (CMS) for the first time to negotiate the price Medicare (Part D) pays for pharmaceuticals. The initial CMS list featured drugs that are among the most commonly used and highest in total spending in Part D. Included are treatments for blood clots (apixaban [Eliquis] and rivaroxaban [Xarelto]), diabetes (empagliflozin [Jardiance] and sitagliptin [Januvia]), cardiovascular disease, and cancer. Collectively, these 10 drugs cost CMS $50.5 billion between June 1, 2022, and May 31, 2023. CMS will negotiate prices for up to 60 Medicare-covered drugs during the four years following 2023 and up to 20 additional drugs annually in subsequent years. When Medicare Part D was created in 2003, it expressly proscribed price negotiations, however that changed when the IRA was passed.

Drug manufacturers are free to opt out of price negotiations, however companies that opt out must either withdraw from Medicare and Medicaid or pay an excise tax on drugs sold to Medicare. These price negotiations are projected to save U.S. taxpayers $25 billion by 2031. Naturally, pharmaceutical companies want to protect their huge profit margins, so they filed multiple lawsuits in numerous geographic regions. They claim that the IRA and CMS regulations are unconstitutional because (they claim) they violate free speech, take property without fair compensation, and deprive companies of due process. They also claim that the excise taxes constitute excessive fines. Also, there are arguments based on separation of powers principles. The First Amendment not only protects freedom of expression but also guards against compelled speech. The companies argue that CMS price negotiations force them to say they agree with maximum “fair” prices even though they don’t agree. They also claim that per the Fifth Amendment, the government cannot take private property without “just compensation,” as well as depriving persons of property “without due process of law.”

The reality is that finally Congress broke through decades of drug company control of the Medicare market in recognition of spiraling, out-of-control costs. Maybe they realized that the U.S. health care system spends twice as much per capita on prescription drugs as other peer nations. In 2019, the U.S. spent $1,126 per person on prescription drugs, whereas comparable countries spent $552. Per capita prescribed medicine spending rose by 69% from 2004 to 2019 compared with 41% in comparable countries. Those other countries set prices directly or limit how much government will spend on healthcare by actively negotiating prices. Expecting taxpayers and mostly elderly Medicare patients to pay significantly higher prices for prescription drugs than in other countries is unfair and unsustainable. Lowering prices is widely popular, with 82% of respondents in a recent poll saying drug costs were unreasonable. It’s about time Congress woke up although ultimately this issue will probably be decided by the Supreme Court.

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