Medicare Drug-Pricing Debate Pits Savings Against Innovation

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The proposal to allow Medicare to negotiate lower prescription-drug prices is central to Democrats’ health care, child care, education and climate packages.

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Pharmaceutical companies say the push will sharply curtail their revenues, reducing their ability to attract outside investment to invest in research and produce new drugs. Proponents of allowing Medicare to negotiate say the industry is exaggerating the impact and using emotional appeals to distract the public from focusing on its prices.

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“Their argument has always been that Western civilization is dying out,” if Medicare can negotiate, Senate Finance Committee Chairman Ron Wyden (D., Ore.) told reporters last week. “It’s not close to what’s actually happening.”

Republicans and some Democrats say they worry that reducing revenue from some drugs will make companies and investors more reticent about investing money in developing new treatments.

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Bill Cassidy (R., La.) of gastroenterologist said, “Venture capital has a choice about where to spend their money to get a better return rate—it doesn’t have to be for a new cancer drug. ” An interview last week. “We take it for granted that they do.”

Nonpartisan Congressional Budget Office estimated in august Similar to what House Democrats have proposed, legislation would result in two fewer new drugs being introduced in the first decade, 23 fewer drugs in the next decade and 34 fewer drugs in the third decade, a reduction of about 8%. Over the past decade, the Food and Drug Administration has approved Anywhere from 22 to 59 new drugs every year.

David Ricks, Alli’s President and Chief Executive, said, “We cannot and will not support policies that restrict patient access and erode our ability to develop the next generation of innovative new products.” , and that’s what’s being proposed on Hill right now.” Lilly & Co. told reporters last month.

The House Democratic proposal would allow Medicare to negotiate prices with drug companies on the most expensive and commonly used group of drugs that do not face competition, as well as insulin. Those negotiated prices in the group of six developed countries cannot exceed 120% of the average drug price, which is generally lower than in the US if companies refuse to negotiate or do not agree to a price, So they will be subject to 95% excise tax of the sale of that drug.

Senate Democrats are working on their own approach, which Mr Widen said would still strengthen drugmakers’ ability to produce new drugs and could be phased out over time. Mr Widen has released the principles guiding his approach but has no details.

Healthcare experts said there is uncertainty about what kind of prices Medicare will be able to negotiate, how it will affect drugmakers’ decisions on research and development and which specific drugs may never hit the market.

“There’s no doubt that there is some trade-off from lower prices,” said Larry Levitt, executive vice president of health policy at the Kaiser Family Foundation, a nonprofit focused on health policy.

Mr Levitt said the government is more likely to strike a hard bargain on drugs that don’t actually provide more additional benefits to patients than innovative drugs. “It is unlikely that the federal government would reduce the price of a new life-saving drug so much that the manufacturer would pull it from the market. It would be politically insane on the part of the federal government,” he said.

Democrats in both houses plan to pass the sweeping package, a vast expansion of the social safety net, through a process involving the budget that allows them to clear the Senate with only a simple majority instead of 60 votes. . But to do so, they must reach a near-unanimous consensus on its contents, as they cannot have more than three defectors in the House and none in an equally divided Senate.

The drug-pricing proposition has raised tension in both chambers. A group of five House Democrats introduced their own pricing legislation and some voted against the bill in committee due to concerns about its effects on research and development.

Robert Menendez (D., NJ) said, “We have to be vigilant to make sure that innovation, whether in the pharmaceutical industry or any other, is protected because you want life-saving, life-enhancing drugs. ” In an interview last week. “It’s an issue that needs to be considered in the mix.”

But many Democrats in Congress said pharmaceutical companies are already highly profitable and prefer to direct those profits to shareholders rather than put them into research. A July report by Democrats on the House Oversight Committee, looking at the finances of the largest 14 pharmaceutical companies, found that between 2016 and 2020, they spent more than $577 billion on stock buybacks and dividends for investors, which they research. more than $56 billion was spent on development.

One concern that some patients raise is that if drugmakers back their research, treatments for rare diseases that affect fewer people would get the first cut.

“There aren’t many of us, so it’s clear that R&D will be a very low priority,” said 32-year-old Sumaira Ahmed. Optic nerve and spinal cord.

“It already sounds like it, to be honest, but these kinds of provisions will further underline the feeling that rare diseases will be at the bottom of the list and that is frightening,” said Ms. Ahmed, a volunteer patient advocate with Voters for the Cure, which works with a trade group of drug manufacturers called PhRMA. Current federal law has incentives for drug companies to develop drugs for rare diseases, including tax credits, an exemption of an application fee that drug companies usually pay the Food and Drug Administration, and a guarantee period of market exclusivity. .

Lawmakers acknowledge that they want to preserve the ability of drugmakers to create new drugs and some say the industry’s warnings are calculated to elicit an emotional response from the public.

“The danger with pharma is that if we do anything to make pricing fair, the person we love will not be able to get the medicine they need,” Rep. Peter Welch (D., Vt. .) said in a previous interview. Week. “It is a matter of concern to each one of us.”

[email protected] . on Christina Peterson

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