US is finally trying to rein in drug giants

At the end of August, something important occurred in the US. The Centers for Medicare & Medicaid Services (CMS), a government agency, announced the first list of prescription medicines that have been selected for price negotiations under Inflation Reduction Act (IRA) passed by US Congress last year. This means pharmaceutical giants such as Johnson & Johnson, Novartis, Merck, Bristol Myer Squibb, and Eli Lilly will no longer be able to set prices as they like for drugs used to treat a range of life-threatening conditions from blood cancer, diabetes and clots in the heart to Crohn’s disease. It is a small but very critical step to rein in Big Pharma, which has been enjoying a free run and astronomical profits for decades at the cost of patients and the US healthcare system.

It is small because the negotiations only cover expensive prescription drugs within the Medicare programme and do not apply to private insurance or cash sales. Yet, the savings will be enormous for the US administration and individuals—more than $287 billion over 10 years, according to projections made by the Congressional Budget Office. IRA, supported by the Democrats but opposed by every Republican member, was signed into law in August 2022 by President Joe Biden, who has made it a cornerstone of his economic policy.

In a statement issued to mark the listing of the first 10 drugs for price negotiation, the White House described it as a historic action. For far too long, Americans have paid more for prescription drugs than any major economy but this is expected to change. “While the pharmaceutical industry makes record profits, millions of Americans are forced to choose between paying for medications they need to live or paying for food, rent, and other basic necessities. Those days are ending,” Biden promised. And it was good to hear him say that he would not back down, even though Big Pharma has so far filed eight lawsuits against IRA and spent nearly $400 million last year to try to stop its progress.

IRA is expected to make ground-breaking changes as it aims to prevent increases in drug prices from surpassing inflation. That is one of the main components of the law; the other is to reform Medicare's drug-pricing policy through price negotiations. Not since 1963, when President John F Kennedy issued an order restricting patent claims on government science, has a US government taken on Big Pharma so frontally. Kennedy’s order was visionary. He said federal research, specially in “fields which directly concern the public health”, should be shared with all. In his order, issued just a month before he was assassinated, Kennedy wrote that the country’s interest is “served by sharing the benefits of government-financed research and development with foreign countries to a degree consistent with our international programmes and with the objectives of US foreign policy.” A far cry from the creed of latter-day US administrations, which have weaponised intellectual property laws on medicines and healthcare and used it to browbeat developing nations.

But much has changed in the US since the 1960s and the vision of the Kennedy era. Lawmakers, barring a few committed and doughty warriors like Elizabeth Warren and Pramila Jayapal, are for the most part in the thrall of the powerful drug industry, which is the biggest lobbyist on Capitol Hill. It pays hundreds of million dollars to promote its interests and has funded the election campaigns of many, including Hillary Clinton’s unsuccessful presidential bid. As Biden notes, it spent $400 million to campaign against IRA, which would put the brakes on what an association representing senior citizens in the US describes as the “pharma industry’s unreasonable and astronomical profits at the expense of what people with chronic conditions need to survive”.

That is not an exaggeration, because the drugs accounted for more than $45 billion in Medicare spending from June 2022 to May 2023. They also cost senior citizens $3.4 billion in out-of-pocket costs last year, according to the government. There are no alternatives for these drugs that bring in the highest profits for their innovators. For instance, Imbruvica, a drug jointly marketed by AbbVie and J&J to fight blood cancers, costs $484 per pill; and it is a medicine that has to be taken daily. J&J’s Stelara, used for Crohn's disease, is administered through infusion or injection.

The cost is an unbelievable $13,971 for 0.5 millilitres! No generic alternatives are in sight. In response to IRA, pharma companies and industry associations have come out with all guns blazing. In the lawsuits challenging the price negotiations, they have cited multiple Constitution-based barriers to such a policy. They have also orchestrated their assault carefully with different companies and trade bodies, including the US Chamber of Commerce, targeting separate elements of the law. While Merck and Bristol Myers Squibb are claiming that IRA is an attack on their First and Fifth Amendment rights, industry lobbyists and other litigants have cited the Eighth Amendment in their lawsuit. These are all guarantees of individual freedoms.

Surprisingly, or not so surprisingly, the US Chamber of Commerce has also filed a challenge, arguing that the pricing provisions “violate fundamental protections for free enterprise enshrined in our Constitution”. The chamber also sought a preliminary injunction in a brazen attempt to stop the programme in its tracks.

The lawsuits have used extreme language in a reflection of their anger over being brought to book. Merck, the first company to file a challenge, has called the drug negotiation programme a sham and a “political deception” that is “tantamount to extortion”. The “Fifth Amendment requires the Government to pay just compensation if it takes property for public use,” says the clearly outraged multinational. “Yet the singular purpose of this scheme is for Medicare to obtain prescription drugs without paying fair market value.”

Unfazed, the White House points out that Big Pharma regularly forces Americans to pay many times more than customers in other countries for the same medicines. It is confident that there is nothing in the Constitution that prevents Medicare from negotiating lower drug prices.

Millions in the US and elsewhere are pinning their hopes on a fair court decision. There is little love lost for Big Pharma anywhere in the world.

This was first published in the 16-30 September, 2023 print edition of Down To Earth

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