U.S eyes battle with drug giants over 10 costly medications for seniors

The list is expected to arrive within the next two weeks, and industry experts believe it will include some of the most widely prescribed treatments for arthritis, blood disorders, heart disease and diabetes—which has prompted top manufacturers, including Bristol Myers Squibb, Merck and Johnson & Johnson, to challenge the administration in court.

The negotiation process arrives one year after President Biden signed the Inflation Reduction Act, which included an array of new programs that aim to limit or lower older Americans’ drug costs. Already, seniors have realized some financial benefits from the law: More than 4 million older Americans enrolled in Medicare have seen a decrease in their insulin costs, according to an estimate from the White House this month.

“We pay more for our prescription drugs than any country,” Biden said Wednesday, marking the first anniversary of the law’s enactment. “For years, Big Pharma won. Big Pharma blocked us. But not this time.”

Yet the most substantial savings are years away, and they are far from guaranteed. The prospects now hinge on the Biden administration’s ability to battle a growing number of lawsuits from the pharmaceutical industry.

One fast-moving case —brought by the legal arm of the U.S. Chamber of Commerce —seeks to block the U.S. government from even starting the drug-price negotiation process. The group’s dues-paying members include AbbVie and Indianapolis-based Eli Lilly and Co., two major drugmakers, as well as Genentech, whose chief executive this month said the biotech company could slow development of an ovarian cancer treatment because of the new federal cost-cutting program.

In response to the lawsuit, the senior advocacy group AARP plans to intervene Friday, telling the court in an expected legal brief that some of its roughly 38 million older members “are already having to choose between rent, food and medication,” a spokeswoman said in advance of the filing.

“Our constituency [sees] it as yet another attempt by big drug companies to stand in the way of getting the price of prescription drugs under control,” said Nancy LeaMond, the executive vice president for government affairs at AARP.

Andrew Varcoe, the deputy chief counsel for the U.S. Chamber Litigation Center, called the negotiation process unconstitutional. He predicted other legal challenges could arise once the Biden administration finalizes its list of targeted drugs, which it plans to release before Sept. 1.

“It is quite conceivable that after September 1, some parties that have been thinking about it will decide to file more lawsuits,” Varcoe said.

For millions of Americans, the legal wrangling carries significant weight, since drug prices in the United States are much higher than they are in comparable countries around the world. The rising costs threaten patients’ physical health and jeopardize their financial well-being—leaving some people no choice but to forgo necessary care.

Studying the market in 2019, the nonprofit Peterson-KFF Health System Tracker reported last year that the United States spent about $1,126 per capita on prescription drugs—more than double the average in developed nations such as Canada, Germany and Japan. That figure included spending by insurance companies as well as patients who face sizable out-of-pocket bills for their medication.

Soon after Democrats captured the House, Senate and White House in 2020, party lawmakers began devising legislation that might deliver on a longtime campaign promise to lower health-care costs. They settled on the Inflation Reduction Act, which granted powers to Medicare to negotiate the price of select medicines directly with pharmaceutical companies.

Under the law, the United States may target a narrow set of widely used, costly drugs—10 in the first year, and more to come—for price negotiation. The goal is to come to terms with manufacturers on new, lower rates by 2026. Pharmaceutical firms that refuse to strike a deal could face massive financial penalties based on their sales.

For patients, the lengthy process is expected to save them money, since seniors on Medicare typically must pay a percentage of a prescription’s price. By 2031, drug prices are expected to be about an average of 8 percent lower under Medicare’s prescription plan, known as Part D, according to the nonpartisan Congressional Budget Office.

The program also is expected reduce government spending: Overall, the health-related provisions in the IRA could save Washington about $237 billion over the next decade, the CBO found.

A number of other countries—including England, France and Germany—cqnegotiate some drug prices on behalf of their citizens. In the United States, the Department of Veterans Affairs has similar powers to purchase medicine at negotiated rates, resulting in lower costs compared to Medicare, according to a recent federal report.

But the idea historically has drawn fierce opposition from Republicans, who argue against government intervention in the marketplace. Major pharmaceutical companies, meanwhile, contend that federal efforts to force lower prices could constrain their research and development into treatments and cures.

Some drugmakers, including Eli Lilly, have signaled that they could explicitly reduce investment in small-molecule drugs, including those that target certain cancers, since they are eligible for price negotiation earlier than other types of medicine. Eli Lilly declined to comment, and Genentech, which also raised research concerns, did not respond to a request.

“The drug pricing provision of the IRA are penny wise and pound-foolish,” said Stephen Ubl, the chief executive of PhRMA, the industry’s leading lobbying group. “They might, and I emphasize the word might, lower costs of today’s medicines at the cost, the incredible cost, of the development of future treatments and cures.”

Last year, pharmaceutical companies and trade organizations spent $375 million in total lobbying, including their efforts to oppose the Inflation Reduction Act, according to records compiled by OpenSecrets, a money-in-politics watchdog. The figure does not include spending by PhRMA and its allies to attack Democrats who backed the law in television ads last year.

Since then, some drugmakers have escalated their attacks, taking the fight to federal courts.

The industry has filed six lawsuits, including legal challenges from Merck, the maker of the popular diabetes drug Januvia and the cancer therapy Keytruda; Bristol Myers Squibb, the manufacturer of the blood thinner Eliquis; and Johnson & Johnson, which offers Xarelto, another blood thinner. All three companies cited their drugs as potential targets for price negotiation.

The drugmakers either did not respond to requests for comment or declined to comment. In past public statements, they blasted the new Medicare program as unconstitutional, with Merck going as far as to call it “political Kabuki theater.”

PhRMA also sued the Biden administration in July, as did the U.S. Chamber, which further sought an injunction that could block implementation of the new Medicare program until its underlying legal issues are resolved. The business lobby asked a judge in an Ohio federal court to rule on its request before Oct. 1, the deadline by which companies are supposed to indicate if they plan to participate in negotiation.

Regardless of the outcome, Varcoe, one the chamber’s top lawyers, said the legal fight—and the “magnitude of the consequences imposed by this law”—raise the odds that its fate may be “decided by the Supreme Court.”

Chiquita Brooks-LaSure, the administrator for the Centers for Medicare and Medicaid Services, pointed out in an interview that drug companies already “negotiate around the world.” The agency declined to comment specifically on the litigation.

“It’s critically important that we have innovative drugs come to market,” she said, adding: “It’s not going to help us if there are incredible, innovative products on the market that people can’t get.”

The flurry of lawsuits are reminiscent of the legal barrage that greeted Democrats’ last major effort to lower health-care costs. A dizzying array of opponents—including business groups, insurance giants and Republican officials—sued repeatedly to overturn the Affordable Care Act adopted under President Barack Obama in 2009.

But the Supreme Court rejected major challenges to the law, while Republicans on Capitol Hill failed in dozens of votes to repeal it—leaving the law, known as Obamacare, largely intact.

More than a decade later, Biden and his top aides have pledged to fight vigorously against any attempt to undo their signature legislative accomplishment. Some lawmakers, meanwhile, still believe that Congress could go further to lower drug costs, especially after they had to scale back the IRA—and its original plan for a more dramatic expansion of Medicare—to assuage skeptical moderate Democrats.

“There’s no question that the IRA has done some good things,” said Sen. Bernie Sanders (I-Vt.), an architect of the law. “There is, I think, no serious debate that—given the enormous crises facing our broken health-care system—that we have an enormous way to go.”

For now, the president has tried to promote some programs that have delivered savings to seniors.

The law extended key tax credits that further lower the cost of insurance for millions of Americans, while allowing older Americans to receive the shingles vaccine and other key inoculations free starting this year. And it imposed a $35 cap on the cost of insulin purchased through Medicare, after Republicans defeated an attempt to limit its price for all patients.

For Pam Bloink, the savings have been noticeable. The 64-year-old former teacher in Rockford, Mich., had been paying as much as $80 for her long-acting insulin—one of many treatments that had added up to thousands of dollars in out-of-pocket costs last year.

“Every little bit helps,” she said.

Some drugmakers—including Eli Lilly—have announced that they plan to cut some insulin prices for Americans on private insurance as well. But the greatest beneficiaries may be the poorest seniors: Studying Medicare claims data, researchers at the University of Wisconsin’s School of Medicine and Public Health and the University of Southern California’s Schaeffer Center for Health Policy & Economics projected that patients had filled 50,000 more insulin prescriptions for $35 each month between January and April—and about 20,000 of them might never have been filled without the law.

Rebecca Myerson, a professor who helped write the study, said the data suggest the IRA is providing some financial relief to patients who would have “otherwise gone without” insulin.

The law also put in place a complicated system that lowers seniors’ expected drug payments if the price of those medicines rises faster than the rate of inflation. In June, the agency announced 43 drugs that it would target for recent price spikes. And the spending package limited seniors’ yearly out-of-pocket costs under Medicare’s prescription drug program, though the cap—set at $2,000—begins in 2025.

The change eliminates a widely despised feature of the drug insurance program that at times has left the sickest Medicare patients on the hook for a much larger share of their prescription costs. Juliette Cubanski, deputy director of the Program on Medicare Policy at KFF, estimated it could ease costs for “well over 1 million people on Medicare,” potentially more than even the drug negotiation program may eventually help.

Sarah Conklin, a 68-year-old in Menasha, Wis., said she is eagerly awaiting the change. Last year alone, she said, she paid more than $6,000 for medicine to treat her various health conditions, including multiple sclerosis.

“Just to take some of that off my plate is huge,” said Conklin, a Democratic activist who appeared with the advocacy group Protect Our Care at an event last month to highlight the impacts of the law. “The cost of prescription drugs right now is obscene.”