Chief Executive Officers of pharmaceutical companies testify before the Senate Finance Committee on "Drug Pricing in America: A Prescription for Change, Part II" February 26, 2019 in Washington, DC. From left to right are Richard A. Gonzalez, chairman and CEO of AbbVie Inc; Pascal Soriot, executive director and CEO of AstraZeneca; Giovanni Caforio, chairman of the board and CEO of Bristol-Myers Squibb Co.; Jennifer Taubert, executive vice president and worldwide chairman of Janssen Pharmaceuticals, Johnson & Johnson; Kenneth C. Frazier, chairman and CEO of Merck & Co. Inc.; Albert Bourla, CEO of Pfizer and Olivier Brandicourt, CEO of Sanofi.
Win Mcnamee | Getty Images News | Getty Images
The pharmaceutical industry is aiming to strike down Medicare's historic new powers to slash drug prices for seniors through a Supreme Court ruling, legal experts say.
Drugmaker Merck, the U.S. Chamber of Commerce and Bristol Myers Squibb filed separate lawsuits within days of each other this month asking federal courts in Washington, D.C., the Southern District of Ohio, and New Jersey to declare the price negotiations unconstitutional under the First and Fifth amendments.
The lawsuits are the opening salvo in what will go down as a historic and potentially decisive battle over the federal government's efforts to control rising drug prices.
The Inflation Reduction Act, passed in a narrow party-line vote last year, gave Medicare the power to negotiate prices for the first time in the program's nearly 60-year history — a watershed moment that the Democratic Party had long fought for.
The pharmaceutical industry views the program as posing a major threat to revenue growth and profits. The companies claim the program will stifle future drug development in the U.S.
Merck fears its blockbuster cancer therapy Keytruda, which generated 35% of the company's $59 billion in revenue for 2022, will be targeted by the program in the future. The company also worries the federal government will select its Type 2 diabetes drug Januvia, which generated $2.8 billion in revenue in 2022, for negotiations this year.
Drugmaker Abbvie, a member of the Chamber of Commerce's Dayton, Ohio, chapter, is defending its blood cancer drug Imbruvica, which generated $4.6 billion in revenue last year, or about 8% of its total sales.
And Bristol Myers Squibb is trying protect its blood thinner Eliquis, which brought in $11.8 billion in sales last year, or about 25% of the company's $46 billion total revenue for 2022.
These are the first lawsuits challenging Medicare's new powers, but they are unlikely to be the last.
The big drugmakers' lobby group, the Pharmaceutical Research and Manufacturers of America, told CNBC in a statement that it supports the claims made in the lawsuits.
A spokesperson for PhRMA said the organization is also considering litigation against Medicare. PhRMA's members include other big drugmakers like Eli Lilly, Pfizer and Johnson & Johnson.
Legal experts and financial analysts who cover the pharmaceutical industry said Merck, the chamber and Bristol Myers Squibb will try to litigate their claims all the way to the high court.
"These lawsuits were written with the Supreme Court in mind," said Robin Feldman, an expert on intellectual property and health law at the University of California College of the Law in San Francisco.
Nicholas Bagley, a former Justice Department attorney, said the high court is the "big fish." Any decision striking down the Medicare price negotiations would ultimately have to be made by the justices, said Bagley, former chief legal counsel to Michigan Gov. Gretchen Whitmer.
Chris Meekins, an analyst with Raymond James, noted that the all four attorneys representing Merck previously served as clerks to conservative Supreme Court justices: They clerked for Antonin Scalia, Brett Kavanaugh and Neil Gorsuch.
"That is noteworthy in that it is clear to us that Merck is ready and willing to take this all the way to the Supreme Court if needed," Meekins wrote in analyst note.
Long legal battle ahead
Merck, the chamber and Bristol Myers Squibb filed their lawsuits ahead of two key deadlines.
Health and Human Services Secretary Xavier Becerra will publish a list by Sept. 1 of the 10 drugs that Medicare has selected for the negotiations. The drugmakers then have to agree to participate and file manufacturing data to the Centers for Medicare and Medicaid Services the following month.
The actual price reductions that come out of the negotiations, which conclude in August 2024, won't take effect until January 2026.
The companies face severe financial penalties that are several times higher than their drug's daily revenues if they do not enter the negotiations and comply with the program's conditions. Drugmakers can avoid the taxes only if they pull their drugs out of Medicare and Medicaid rebate programs.
Meekins said in his analyst note earlier this month that Merck might try to get the federal courts to block the law before the deadlines.
But Bagley noted that Merck and the chamber did not file motions for preliminary injunctions to immediately block the law's implementation. Bristol Myers Squibb did not either. He said the plaintiffs can't plausibly claim an immediate injury now because the price cuts wouldn't go into effect until 2026.
Bagley said the parties could ask for an injunction that is tied to the October deadlines when they sign agreements to participate in the negotiations and start submitting data.
The odds are that the lawsuits will be a long slog, Bagley said. "Any fight over the proper remedy will come at the end of the case, once the legal merits are finally resolved," he said.
The judge assigned to Merck's case is Randolph Daniel Moss, who was appointed by former President Barack Obama. The chamber's case is assigned to Judge Thomas M. Rose, who was appointed by former President George W. Bush.
Bagley said both judges would probably be skeptical of a motion for preliminary injunction tied to the October deadlines, though Rose could perhaps be persuaded to allow it.
Expect more lawsuits this fall
Kelly Bagby, vice president of litigation at the AARP Foundation, said more lawsuits will almost certainly come when HHS publishes the list of 10 drugs in September.
AARP is the influential lobby group that represents people older than age 50. The organization has strongly advocated in favor of Medicare's new negotiation powers.
Bagby said pharmaceutical companies whose drugs are selected for negotiation will likely ask federal courts for preliminary injunctions to block the law's implementation when the list publishes in September.
The list of drugs subject to negotiation could include Pfizer's Ibrance, 's Xarelto, Eli Lilly's Jardiance, Amgen's Enbrel and AstraZeneca's Symbicort, among others, according to a March analysis published in the Journal of Managed Care and Specialty Pharmacy.
Pfizer CEO Albert Bourla told Reuters in May that he expects legal action to be taken against Medicare over the negotiations, though he said it is unclear if the drugmakers will be able to stop the law's implementation before the 2026 cuts go into effect.
Eli Lilly, in a statement to CNBC, said the company shares the companies' concerns and will evaluate the negotiations implementation to "determine any possible actions."
Bagby also believes the issue is heading for the Supreme Court. She said the companies will probably scatter their cases around the country — like Merck, the chamber and Bristol Myers Squibb did — in an attempt to get federal appellate courts to issue competing decisions.
The Merck case in Washington, D.C., district court would move on appeal to the D.C. Circuit Court of Appeals, which has a majority of judges appointed by Democratic presidents.
The chamber's case would be appealed to the U.S. Sixth Circuit Court of Appeals, which has a majority of judges appointed by Republican presidents, particularly Donald Trump.
And Bristol Myers Squibb's case would head to the U.S. Third Circuit Court of Appeals, which also has a slight majority of judges appointed by Republicans.
If circuit court decisions on the matter contradict one another, the Supreme Court would step in to decide the issue, Bagby said.
White House press secretary Karine Jean-Pierre said the Biden administration is confident it will succeed in the courts.
"There is nothing in the Constitution that prevents Medicare from negotiating lower drug prices," Jean-Pierre said in a statement.
And Beccera added that "we'll vigorously defend the President's drug price negotiation law, which is already lowering health care costs for seniors and people with disabilities."
"The law is on our side," Becerra said in a statement.
Patents at the center of the fight
Feldman, the intellectual property and health law expert, said the success or failure of the pharmaceutical industry's attempt to take down Medicare's new powers will hinge to a large degree on whether the courts consider patents a form of private property.
Merck claims in its complaint that the negotiations violate the Fifth Amendment, which prohibits the government from taking private property for public use without just compensation. Bristol Myers Squibb made an identical argument in its complaint.
Merck and Bristol Myers Squibb argue that Medicare is taking pharmaceutical companies' private property — patented drug products — and coercing them to accept a price that is much lower the market value of the medications. The chamber made broader due process claims under the Fifth.
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Feldman said the Fifth was written with property such as land in mind. Patents differ substantially from land because they are issued by the federal government, she said. And, she noted, drug prices are driven to a significant degree by the value derived from government-issued patents.
The Supreme Court has not ruled that patents are private property under the Fifth's "takings clause," Feldman said, pointing to the 2018 case Oil States Energy Services v. Greene's Energy Group.
Justice Clarence Thomas said in his majority opinion in the case that the high court has long recognized patents as a matter involving "public rights," but the court hasn't definitively explained the difference between these government-derived public rights and private rights.
"Applying the takings clause to patents would be like the shot heard round the world — it would be an extraordinary shift and the companies will have a heavy lift to convince the courts that those words apply to patents," Feldman said.
FAQs
What is the Prescription Drug price Relief Act? ›
This Act requires the Secretary of Health and Human Services to annually identify the list of “excessively priced” patented, brand name drugs that are being sold in the U.S. at prices higher than the median price in Canada, the United Kingdom, Germany, France, and Japan.
What is the 27 drug Inflation Reduction Act? ›March 15 (Reuters) - The U.S. government said on Wednesday it will subject 27 drugs to inflation penalties, a move that will require the pharmaceutical companies to pay Medicare rebates if they raise prices at a faster pace than the rise in inflation rate.
How much would Medicare negotiation save? ›The researchers found that the Medicare drug negotiation provision would have saved the U.S. $26.5 billion, or 5% of all drug spending, during those three years. "That's a pretty sizable reduction in spending from a very small number of drugs," said the study's lead author, Dr.
Can health insurance companies negotiate drug prices? ›Insurers also negotiate directly with drug manufacturers, as manufacturers may offer rebates in exchange for including their drugs in the insurer's formulary (set of covered drugs) or placing them on a more desirable "tier" (assigning them a lower copayment).
Can the government control prescription drug prices? ›The federal government does not regulate drug pricing. However, it encourages the development of generic drugs through an abbreviated approval process.
Does the US government impose regulated prices on prescription drugs? ›Medicines without Competition
Unlike other nations, the U.S. lets manufacturers of drugs and biologics set whatever price they choose.
The estimated average monthly premium for Medicare Part D stand-alone drug plans is projected to be $43 in 2023, based on current enrollment, a 10% increase from $39 in 2022 – a rate of increase that outpaces both the current annual inflation rate and the Social Security cost-of-living adjustment for 2023.
How does the Inflation Reduction Act help seniors? ›Last August, President Biden signed into law the Inflation Reduction Act, which for the first time allows Medicare to negotiate lower prescription drug prices for seniors, caps the cost of insulin at $35, makes recommended vaccines free for Medicare beneficiaries, and requires prescription drug companies to pay rebates ...
What is the Inflation Reduction Act of 2023? ›The Inflation Reduction Act allows tax-exempt and governmental entities to receive elective payments for 12 clean energy tax credits, including the major Investment and Production Tax credits, as well as tax credits for electric vehicles and charging stations.
What changes are coming to Medicare in 2023? ›Everyone pays a Part B monthly premium, even people with Medicare Advantage plans. In 2023, the Part B standard premium is $164.90 per month, down from $170.10 per month in 2022. If you have a higher income, you may pay more. The Part B deductible dropped to $226 in 2023, down from $233 in 2022.
How to save money on prescription medicine in 2023? ›
- Look for Generic Options. Many kinds of name-brand prescription medication have generic equivalents. ...
- Use Prescription Discount Cards. ...
- Sign Up for a Prescription Assistance Program (PAP) ...
- Sign Up for Pharmacy Programs. ...
- Look for a Nonprofit Pharmacy Near You.
If you have both Medicare Part B and Medicare prescription drug coverage, you'll pay higher premiums for each. If you have only 1 — Medicare Part B or Medicare prescription drug coverage — you'll pay an income-related monthly adjustment amount only on the benefit you have.
Did the Democrats vote to raise drug prices? ›Democrats who passed the Schumer-Manchin bill on Sunday voted to raise drug costs and health premiums for 220 million privately insured Americans. That isn't hyperbole. It's the inevitable economic result of Medicare drug price controls after the Senate parliamentarian this weekend struck the bill's inflation rebates.
Why are drugs so expensive without insurance? ›Lack of price regulation
At a basic level, drugmakers call the shots when it comes to how much American patients pay for their prescriptions. While the U.S. Food and Drug Administration (FDA) regulates how new drugs are tested, marketed, and released on the market, they don't have any price control over medications.
When pricing their drugs, pharmaceutical companies consider a drug's uniqueness and effectiveness as well as competition from other companies. Companies also consider the research and development (R&D) costs required to bring a drug to market.
What three companies control over 80% of prescription drug benefits? ›The three biggest PBMs — OptumRx, CVS Caremark and Express Scripts — control about 80% of prescription drug sales in America and are the most profitable parts of the health conglomerates in which they're nestled.
How many Americans can't afford prescriptions? ›As many as 18 million Americans can't afford their prescribed medications, a new nationwide poll finds. That's 7% of the adult population in the United States. But when it comes to households making less than $24,000 per year, the percentage jumps to 19%, the West Health/Gallup poll revealed.
Has Medicare ever been able to negotiate drug prices? ›For the first time in history, because of the Inflation Reduction Act, Medicare will have the ability to negotiate prescription drug prices. That process begins in 2023, and the first negotiated prices will go into effect in 2026.
What country has the cheapest prescription drugs? ›Turkey saw the cheapest prescription drug prices in the comparison, with Americans paying almost eight times as much as residents there.
Why does the United States have such inflated costs for prescription medication? ›Drug makers set the prices, which makes medications more expensive. Companies use the drug patent system to limit competition and keep prices high. A lack of research on drug comparisons can lead to fewer low-cost options on the market.
Does the US have the highest prescription drug prices? ›
According to a 2021 study by the RAND Corporation, a non-profit global policy think tank, prices of prescription drugs in the U.S. are 2.4 times higher than the average prices of nine other nations (Austria, Australia, Belgium, Canada, Germany, Japan, Sweden, Switzerland and the United Kingdom).
How much will Social Security take out for Medicare in 2023? ›Medicare Deduction From Social Security 2023
In 2023, most individuals enrolled in Medicare and receiving Social Security benefits will have $164.90 deducted from their Social Security check each month. This amount covers the monthly premium specifically assigned to Medicare Part B.
The Centers for Medicare & Medicaid Services (CMS) has announced that the standard monthly Part B premium will be $164.90 in 2023, a decrease of $5.20 from $170.10 in 2022.
Are we getting a raise in Medicare in 2023? ›For 2023, the Part A deductible will be $1,600 per stay, an increase of $44 from 2022. For those people who have not worked long enough to qualify for premium-free Part A, the monthly premium will also rise. The full Part A premium will be $506 a month in 2023, a $7 increase.
Is there a $2000 cap on drugs for seniors? ›Beginning in 2025, there will be a hard cap or annual limit of $2,000 for prescription medications. No one with Medicare insurance will spend more than $2000 a year for their prescription medications that are covered under Part D. In the years that follow, the cap amount will be adjusted based on inflation.
What is the out-of-pocket limit for Medicare Part D in 2024? ›Out-of-pocket drug spending will be capped at $2,000
For Part D enrollees who take only brand-name drugs, annual out-of-pocket costs at the catastrophic threshold will fall from around $3,300 in 2024 to $2,000 in 2025 (Figure 3).
The Capping Drug Costs for Seniors Act of 2021 creates an out-of-pocket spending maximum of $2,000 for the millions of Medicare beneficiaries who are enrolled in the Medicare Part D prescription drug program. It is an important first step toward making medicine more affordable.
Who qualifies for Inflation Reduction Act? ›To qualify, a taxpayer must make less than $75,000 (single), $112,500 (head of household), or $150,000 (joint filers). To qualify, a vehicle must: Cost less than $25,000, Be at least two years old, and.
What is the new act for inflation? ›The Inflation Reduction Act contains $500 billion in new spending and tax breaks that aim to boost clean energy, reduce healthcare costs, and increase tax revenues.
How long will the Inflation Reduction Act? ›SUMMARY: THE INFLATION REDUCTION ACT OF 2022
The new proposal for the FY2022 Budget Reconciliation bill will invest approximately $300 billion in Deficit Reduction and $369 billion in Energy Security and Climate Change programs over the next ten years.
Is the donut hole going away in 2024? ›
In 2024 – a year before the $2,000 cap goes into effect – the new healthcare law will eliminate the 5 percent copay. The cap on total spending will protect any retiree who develops a medical condition requiring them to take very expensive medications. Currently, there is no limit on how much they may have to spend.
How do you qualify to get $144 back from Medicare? ›- Be enrolled in Medicare Parts A and B.
- Pay your own premiums (if a state or local program is covering your premiums, you're not eligible).
- Live in a service area of a plan that offers a Part B giveback.
| Part B Premium | 2024 Coverage (2022 Income) 0% Inflation |
|---|---|
| Standard * 3.2 | Single: < $500,000 Married Filing Jointly: < $750,000 Married Filing Separately < $397,000 |
| Standard * 3.4 | Single: >= $500,000 Married Filing Jointly: >= $750,000 Married Filing Separately >= $397,000 |
1. As of January 1, 2023, your Medicare drug plan can't charge you more than $35 for a one-month supply of each Part-D covered insulin product, and you don't have to pay a deductible for your insulin.
What is the prescription drug trend for 2023? ›Conclusion: For 2023, we expect overall prescription drug spending to rise by 6.0% to 8.0%, whereas in clinics and hospitals we anticipate increases of 8.0% to 10.0% and 1.0% to 3.0%, respectively, compared to 2022.
What are the most expensive life saving medicines? ›From bluebird's thalassemia therapy Zynteglo at $2.8 million for a one-time dose to CSL and uniQure's $3.5 million hemophilia B treatment Hemgenix, the three newest gene therapies to land in the U.S. have quickly skyrocketed to top of the list of the industry's most expensive products.
How much Social Security will I get if I make $125000 a year? ›In short, your primary benefit amount is $2,982.97 per month. That's what you'll receive if you wait until your full retirement age, which for someone born in 1955 will be 66 years and two months. You can see that Social Security represents only a small portion of a high-income worker's pay.
How much Social Security will I get if I make $120000 a year? ›The point is that if you earned $120,000 per year for the past 35 years, thanks to the annual maximum taxable wage limits, the maximum Social Security benefit you could get at full retirement age is $2,687.
Does Social Security count as income for Medicare? ›Social Security Benefits and Equivalent Railroad Retirement Benefits - Social Security or equivalent Railroad Retirement Benefits, must be included in the income of the person who has legal right to receive the benefits.
What is the most favored nation drug policy? ›The MFN Model was a mandatory, nationwide model that would test whether more closely aligning payment for Medicare Part B drugs with international prices and removing incentives to use higher-cost drugs can control unsustainable growth in Medicare Part B spending without adversely affecting quality of care for ...
Can the US government regulate drug prices? ›
The federal government does not regulate drug pricing. However, it encourages the development of generic drugs through an abbreviated approval process.
Who is impacted by high drug prices? ›The person most impacted by the high cost of some of the pharmaceuticals is the person who pays cash for medications. The next to be impacted is every taxpayer and business.
What is the number one selling drug in America? ›The COVID-19 vaccine topped the list of 2022's best-selling pharmaceuticals. It sold slightly more last year.
What country uses the most prescription drugs? ›- Data suggests that among those who take prescription medications, the average number of medications taken is four. ...
- Research on prescription drug spending suggests that the United States consumes the most prescription drugs.
Under this statute, it is illegal for a physician to receive remuneration for referring a patient for a service that will be paid in whole or in part by a federal health care program or for prescribing or recommending the purchase of a drug that will be paid in whole or in part by a federal health care program.
What pharmacy is cheapest to fill prescriptions? ›In the Consumer Reports survey, Costco had the best prices for a brick-and-mortar store, while the online mail-order pharmacy Healthwarehouse.com had the lowest overall pricing. The report found the two highest-priced national retailers were CVS Health and K-Mart for the common medications they checked.
What is the deductible for Medicare Part D in 2023? ›This is the amount you must pay each year for your prescriptions before your Medicare drug plan pays its share. Deductibles vary between Medicare drug plans. No Medicare drug plan may have a deductible more than $505 in 2023.
What does the Inflation Reduction Act mean for pharma companies? ›The Inflation Reduction Act requires drug manufacturers to pay a rebate to the federal government if prices for single-source drugs and biologicals covered under Medicare Part B and nearly all covered drugs under Part D increase faster than the rate of inflation (CPI-U).
What is the prescription drug relief? ›Introduced in Senate (03/23/2021) To significantly lower prescription drug prices for patients in the United States by ending government-granted monopolies for manufacturers who charge drug prices that are higher than the median prices at which the drugs are available in other countries.
What was the purpose of the Prescription Drug Marketing Act of 1987? ›Prescription Drug Marketing Act of 1987 - Amends the Federal Food, Drug, and Cosmetic Act to permit only the U.S. manufacturer of a drug to reimport such drug into the United States, except for emergency medical care. Prohibits the selling, purchasing, or trading of prescription drug samples or coupons.
What did Affordable Care Act do for prescription drugs? ›
The ACA sought to improve that by requiring private plans to: Cover at least one drug per drug class. Consider prescription drug coverage as a required health benefit. Remove preexisting conditions as a barrier to getting private health coverage.
How did the Affordable Care Act affect prescription drugs? ›As a result of the Affordable Care Act, coverage for both brand name and generic drugs will continue to increase over time until the coverage gap is closed. The Affordable Care Act also removed barriers for people with Medicare to get preventive services, many of which previously required cost-sharing for patients.
Does GoodRx actually work? ›It was founded in Santa Monica, CA in 2011 by former Facebook executives Doug Hirsch and Scott Marlette. As of 2021, it is accepted at over 70,000 retail pharmacies and has helped patients save over $30B.
What is the donut hole in 2023? ›The Medicare Part D donut hole or coverage gap is the phase of Part D coverage after your initial coverage period. You enter the donut hole when your total drug costs—including what you and your plan have paid for your drugs—reaches a certain limit. In 2023, that limit is $4,660.
What came out of the Medicare Prescription Drug Improvement and Modernization Act? ›After the enactment of Medicare Prescription Drug, Improvement, and Modernization Act in 2003, only insurance companies administering Medicare prescription drug program, not Medicare, had the legal right to negotiate drug prices directly with drug manufacturers.
What is the purpose of the Medicare prescription drug Improvement Act of 2003? ›The 2003 Medicare Modernization Act (MMA) is considered one of the biggest overhauls of the Medicare program. It established prescription drug coverage and the modern Medicare Advantage program, among other provisions. It also created premium adjustments for low-income and wealthy beneficiaries.
Which US government agency is responsible for regulating medications? ›The Food and Drug Administration (FDA) is responsible for protecting the public health by assuring the safety, efficacy, and security of human and veterinary drugs, biological products, medical devices, our nation's food supply, cosmetics, and products that emit radiation.
Who is behind patients for affordable drugs now? ›David Mitchell, Founder.
After more than 30 years at a Washington, D.C. policy and communications firm, he retired in 2016 to devote his full energy to helping fix our broken drug pricing system.
Current Status of Lowering the Medicare Eligibility Age
Then, in September 2021, lawmakers in the House introduced the Improving Medicare Coverage Act (Congress). This Act would lower the eligibility age of Medicare from 65 to 60.
It is financed by the Action Now Initiative (ANI) which is funded by the Laura and John Arnold Foundation. It is bipartisan and does not accept funding from any organizations that profit from development or distribution of prescription drugs.
What impact is the Affordable Care Act expected to have on Medicare? ›
Many of the changes to Medicare made by the ACA remain in effect and have not changed since the law was passed; for example, an increase in the Medicare Part A payroll tax on higher-income workers, as well as preventive benefits like an annual wellness check-up and free coverage of some health screenings.
How was the Affordable Care Act bad? ›The ACA has been highly controversial, despite the positive outcomes. Conservatives objected to the tax increases and higher insurance premiums needed to pay for Obamacare. Some people in the healthcare industry are critical of the additional workload and costs placed on medical providers.