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HomeNewsDrugmakers Look to Limit Medicare’s New Power to Negotiate Lower Drug Prices

Drugmakers Look to Limit Medicare’s New Power to Negotiate Lower Drug Prices


Drugmakers are trying to blunt Medicare’s newfound power to negotiate medicine prices while coping with internal industry disputes and ebbing influence in Washington, D.C.

Under the Inflation Reduction Act, Congress gave Medicare, the country’s biggest buyer of prescription drugs, the authority to negotiate how much it pays for certain high-price therapies, and to get rebates on treatments whose prices rise more than the rate of inflation.

Drugmakers are seeking to ease the law’s impact as regulators begin to work on the details of implementing the provisions, according to people familiar with the efforts.

Yet the lobbying comes without some key lawmakers in the industry’s corner, and at a moment when one of its biggest trade groups, the Biotechnology Innovation Organization, must find a new leader after its chief executive clashed with board members and resigned.

“We’re at a really critical moment of Big Pharma needing to step back and say, ‘How am I going to continue to develop and grow and yet deal with all these pressures on my core business costs?’ ” said

Maria Whitman,

a principal with pharmaceutical consulting firm ZS Associates.

BIO and the Pharmaceutical Research and Manufacturers of America, the industry’s other major trade group, said the law threatened investment in drug development while not doing enough to lower patients’ drug costs.

Both groups also said they are working to limit the law’s effect on drug research.

Prescription-drug makers say pressure on pricing could affect research and development.


Jake Dockins for The Wall Street Journal

For years, the pharmaceutical industry successfully fended off legislative attacks on drug pricing while securing big wins such as the establishment of Medicare’s Part D drug benefit, which the Congressional Budget Office forecasts will spend $111 billion this year for prescription pills.

In the past, companies could rely on allies such as the late Republican Sen.

Orrin Hatch

and some Democrats to support their priorities in Congress.

The industry lobbied against the Inflation Reduction Act, arguing it would lead to lower investment in drug development. Under the new law, Medicare can negotiate the prices of prescription drugs that the program spends the most on, and that have been on the market for nine years if they are a pill or 13 years if they are injected.

The law also requires companies to pay rebates to Medicare if they raise the price of a drug by more than the rate of inflation during the period, starting next year.

The law contains a package of tax and climate provisions, in addition to healthcare measures.

“In all the years I’ve followed the drug industry, and that’s about 50 years, this is the first time they ever suffered a legislative defeat in Congress,” said

Ira Loss,

a senior health analyst at Washington Analysis, a research firm.

David Mitchell,

president of the advocacy and lobbying group Patients For Affordable Drugs, which backed the law, said its passage showed “that pharma can be beaten.”

A provision of the law sought by drugmakers would reduce how much seniors who are covered by Medicare are required to pay out of their own pockets for prescriptions, which could encourage greater use of high-price medicines.

Democrats passed the law without support from a Republican using a process called budget reconciliation, which allowed Democrats to advance the bill through a 50-50 Senate with a simple majority, rather than the 60 votes usually needed.

House Speaker Nancy Pelosi (D., Calif.) at an event in Washington, D.C., last month to mark the passage of the Inflation Reduction Act.


michael reynolds/Shutterstock

In 2021, Democratic Reps.

Scott Peters

of California and

Kurt Schrader

of Oregon joined Republicans in blocking a bill from leaving a committee that aimed to reduce prescription-drug prices by tying them to what other countries paid. They said the bill would impede drug research and development.

This year, they voted for the Inflation Reduction Act.

A spokesman for Mr. Peters said he supported previous attempts to lower drug prices and last year offered an alternative to the proposed legislation that wouldn’t stifle research in the medical and pharmaceutical industries.

Mr. Peters has reported more than $1.1 million in campaign contributions from the drug and healthcare industry since joining Congress in 2012, according to OpenSecrets, which tracks campaign-finance filings. He is the top congressional Democrat recipient of drug donations during the current election cycle, with $125,850, according to the center.

Mr. Schrader received $107,250, second-most in the House among Democrats.

Mr. Schrader said he blocked the legislation last year because it contained provisions that would discourage drug development and, even if it had passed the House, would have died in the Senate. He said he worked with other lawmakers to draft the Inflation Reduction Act.

“If it wasn’t for the work that myself and a few other dedicated people did we wouldn’t have the IRA,” he said in an interview.


Kathleen Rice,

of New York, a third Democrat who blocked last year’s legislation and supported the Inflation Reduction Act, received $8,000 in industry-related donations. A spokeswoman didn’t respond to a request for comment.

Jefferies LLC analysts estimate the Inflation Reduction Act could reduce pharmaceutical-company sales by about $40 billion through 2032. Companies are trying to figure how the law will affect them and what they can do to minimize its impact.


Do you think prescription-drug prices are too high? If so, what would be the best way to lower them? Join the conversation below.

The law will change the economics and commercialization of any new, innovative product, said

Alice Valder Curran,

an attorney at Hogan Lovells who advises drugmakers.

Companies are now working to mitigate the legislation’s impact, shaping rules that detail its implementation and lobbying for additional legislation that could counter some measures, according to people familiar with the efforts.

Among the ideas, some of the people said, are extending the time frame after which certain pills become eligible for Medicare price negotiations, pushing out beyond the nine-year trigger specified in the Inflation Reduction Act.

The industry is also seeking measures that would encourage companies to keep testing a drug after it receives regulatory approval, and that would exempt drugs that treat more than one rare disease, and expand or make permanent a temporary exemption for some drugs if they are a company’s main source of sales, some of the people said.

The actions come as BIO searches for new leadership after its chief executive left amid disputes with board members, The Wall Street Journal reported. The former CEO felt the organization’s advocacy should stay focused on biotech, while some board members wanted BIO to engage more on general social issues not directly connected to healthcare policy, the Journal reported.

BIO’s leadership change won’t affect its advocacy on behalf of the industry, including over the Inflation Reduction Act, a group spokeswoman said.

Write to Jared S. Hopkins at [email protected]

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