The Inflation Reduction Act is threatening research and development for medications urgently needed to meet complex health challenges American seniors are enduring.
The new law – signed by President Biden last year without a single congressional Republican vote – contains a misleadingly labeled scheme known as the Drug Price Negotiation Program. It hands the Department of Health and Human Services (HHS) free rein to force drug manufacturers into sham Medicare price “negotiations.”
As it turns out, “negotiation,” is a government euphemism for price-fixing.
Drug makers are compelled to negotiate prices for certain drugs selected by the government, otherwise they are subject to a tax which starts at 186% of a drug’s daily revenues (tens of millions of dollars in many cases) and escalates daily. And, of course, that scenario isn’t going to play out, because no company is going to subject itself to that kind of financial hemorrhaging. The process itself is more farcical theatrics than negotiation.
It begins with HHS making an offer on the price of a medication. The pharmaceutical manufacturer is then free to counteroffer, but HHS is equally free to ignore it. In the event the drug manufacturer finds that it’s not getting a fair price and is tempted to leave the table, it would be subject to the same crippling tax on its revenues – an offer it can’t refuse.
It doesn’t take an industry insider to see how the government is putting an icy chill on new drug innovation. The price-fixing racket is a powerful disincentive to maintain astronomically expensive research and development plans. According to Merck, it takes an investment of more than $2.5 billion to develop just a single new drug. And along the way, every firm experiences research and development projects that don’t pan out.
By effectively blocking new treatments from entering the development pipeline, the Inflation Reduction Act creates a serious problem for seniors. In fact, 80% of older voters fear the provision will negatively impact drug innovation, a new poll commissioned by American Commitment found.
Their concern is justified; several drug manufacturers are looking for the innovation exit door. Eli Lilly has already announced that it’s abandoning its work on a $40 million blood cancer drug – citing the Biden law as the reason. AstraZeneca CEO was equally candid in placing the blame on the Inflation Reduction Act for potentially scrapping the launch of new cancer medications. According to a University of Chicago study, the government’s extortion scheme may result in up to 342 fewer new drug approvals, the impact leading to many lives lost that would otherwise have been saved.
Among other things, Merck contends in its lawsuit that in setting prices for buyers at a fraction of a drug’s value without just compensation, the government’s “negotiation” program violates the “takings clause” in the Fifth Amendment to the U.S. Constitution which stipulates “nor shall private property be taken for public use, without just compensation.
Seniors stand to benefit from defeating this rankly unconstitutional law. Unsurprisingly, seniors take more prescription medications than the general population. And many are in the position of having to take multiple medications, making them more likely to experience side effects and adverse drug interactions. For example, blood thinners and painkillers can interact with antidepressants and result in increased blood pressure. It’s also true that seniors have a more difficult time with some classes of pharmaceuticals than do younger patients. While better therapy application is part of the solution, new and better medications must be developed to address seniors’ health complexities.
But seniors are far from the only stakeholders. The process of developing new life-saving treatments takes 10 years, on average. So, if Merck prevails, the greatest winners will be those who are yet to become seniors. For their sake, and for the sake of all Americans who hope to become seniors, the “negotiated” drug provision must be found unconstitutional.
Bob Carlstrom is President of AMAC Action, an organization representing over 2.1 million Americans who are age 50-plus.