This week, Democrats and Republicans in Washington pretended to be in a high-stakes debate over the potential effects of negotiating lower prescription drug prices on some drugs for some Americans. In reality, the mainstream debate over the very limited and modest reforms is instructive as to the many ways in which our government continues to serve special interests at the expense of its citizens.
The Inflation Reduction Act of 2022 authorized the Secretary of the Department of Health and Human Services to negotiate prices directly with participating manufacturers for selected drugs that have high total spending and are high-expenditure, single-source drugs that do not have generic or biosimilar competitors.
As is the case whenever its hegemonic power over the U.S. drug market is challenged, Big Pharma responded with a bipartisan carpet bombing of campaign cash and lobbying efforts in one of the, if not the most expensive lobbying effort of all time—spending a whopping $700 million plus over the two years that the legislation was being contemplated.
In the end, the efforts paid off, with Democrats settling on limiting the reforms to Medicare and the Biden administration announcing that it would negotiate the pricing on just 10 drugs this year, with new prices not set to go into effect for another three years! Now, this will undoubtedly be a big help to the small percentage of Americans it will benefit among the larger pool who are being financially strangled by the unconscionable price fixing that has become standard practice in the industry, especially since private equity has taken a sincere interest in pharma assets. However, the hyperbole coming from both sides of the political aisle is comical.
The Biden administration is signaling that the anemic “reforms” will be a significant part of the president’s 2024 reelection campaign, with Vice President Kamala Harris hilariously overselling its impacts while in front of the cameras this week. Meanwhile, Republicans are echoing all of the Chicken Little, the sky is falling, we won’t be able to get you life-saving drugs rhetoric that Big Pharma shouted from the mountaintop while the legislation was being considered and it was suing the government to prevent its implementation. A Wall Street Journal Op/Ed this week even suggested that the rounding error impact such “price controls” might have on drug companies’ bottom lines would lead to “slower cures.”
Big Pharma would like you to believe that if Americans didn’t pay far more than the rest of the world for their prescription drugs, the whole system would fall apart because there wouldn’t be any money to research and develop new drugs. In reality, the vast majority of drugs that have been brought to market in recent years have been delivered via research that had been funded by the U.S. taxpayer, only for a private corporation to get the patent and then use teams of lawyers to play legal games that allow them to keep the patents intact for far longer than is intended to be the case.
The money that Big Pharma would like you to think is going into R&D is really going into lobbying and domestic advertising, since the U.S. is the only country in the world that allows for the sort of direct-to-consumer commercial advertising we are perpetually bombarded by. The public money funneled through the NIH, which has an incestuous relationship with the private industry, allows drug companies to routinely spend up to twice as much on sales and advertising than they do on research and development.
The convoluted process for patents and approvals also creates a degree of regulatory capture that limits competition from both small companies and generic products. Drug companies actually lobby in favor of this sort of regulation precisely so that only the most financially resourced companies can afford to be competitive in the marketplace.
One of the drugs that was most cheered for its inclusion among the ten was fast-acting insulin because three pharmaceutical companies had essentially created a monopoly on a drug that is relatively cheap to produce and needed by more than 7 million of the more than 37 million Americans who suffer from diabetes.
When Frederick Banting discovered insulin back in 1923, the doctor refused to put his name on the patent, thinking it was unethical for a doctor to profit from a discovery that could save lives. His co-inventors sold the patent to a university for $1 with the intention of making it available to everyone who needed it. They wanted everyone who needed their medication to be able to afford it.
The three companies that used patent reformulations to raise prices essentially in lockstep—Eli Lilly, Novo Nordisk, and Sanofi—clearly do not feel the same way, and will be able to continue pilfering the pockets of consumers who aren’t on Medicare. The rest of the list includes three other treatments for diabetes—Jardiance, Januvia, and Farxiga; blood clot medicines Eliquis and Xarelto; Stelara and Enbrel, which treat psoriasis and psoriatic arthritis; Entresto, which treats heart failure; and Imbruvica, a blood cancer medication.
This process is instructive as to how things get done in today’s Washington. Serious reforms are proposed, modest reforms are considered, big-money lobbying ensues, anemic reforms are adopted, and then one side claims a big victory while the other warns of the perilous fallout that will ensue.
What we got was negotiations on 10 drugs for Medicare only that won’t even take place for another three years. It is neither a big victory nor a severe blow to Big Pharma’s hegemony. It is business as usual, which is to say a few crumbs fall to the floor for the average American while the politicians and special interests continue to enjoy the feast at the big table.
Dennis "Mitch" Maley is an editor and columnist for The Bradenton Times and the host of our weekly podcast. With over two decades of experience as a journalist, he has covered Manatee County government since 2010. He is a graduate of Shippensburg University and later served as a Captain in the U.S. Army. Click here for his bio. His 2016 short story collection, Casting Shadows, was recently reissued and is available here.
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