Curbing Inflation Act Reflects Changing RX Drug Policy

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On Tuesday, President Biden signed into law the Inflation Reduction Act. Democratic lawmakers promise the ‘Historic’ law will lower the cost of prescription drugs granting the Secretary of Health and Human Services the power to negotiate prescription drug prices for Medicare patients for the first time.

This achievement reflects 20 years of work by advocates who worked to close a loophole in the Medicare Modernization Act of 2003, which introduced a pharmaceutical benefit for the elderly with no direct functional basis to limit the costs. It also reflects a new political reality in which the most powerful political threat from pharmaceutical companies – warning that any attempt to drive down drug prices will stifle innovation – may no longer hold the same kind of traction it has for over half a century. In recent polls, most Americans, including 90% of registered Republicans, no longer believe that measures to reduce the cost of drugs will prevent the development of life-saving drugs.

Yet while the industry’s best defense against measures to reduce prescription drug prices has weakened, the range of tools used to reduce those costs has also shrunk. Nothing makes this clearer than the difference between the act and the first major push to combat rising prescription drug prices by Sen. Estes Kefauver (D-Tenn.) in the 1950s and 1960s. No one who wants to be taken seriously in Washington in 2022 could even whisper aloud to link the duration of pharmaceutical patents to their comparative effectiveness as the centrist Kefauver did in the early 1960s.

Kefauver was the first legislator to draw attention to “administered pricing” in the pharmaceutical industry. As head of the Senate Antitrust and Monopoly Subcommittee, Kefauver insisted that there was no clearer abuse of pricing power in the U.S. market than monopolistic corporate practices. branded pharmaceuticals. Drug manufacturers preyed on patients who, as “captive consumers”, had to buy the drugs prescribed to them. Manufacturers also used the patent system and Food and Drug Administration approval mechanisms as a shield to secure the high prices they chose.

Kefauver held two years of televised hearings vividly detailing the industry’s manipulative marketing and pricing strategies — inflaming an already furious public over soaring prescription drug costs.

He also proposed a solution: limiting the misleading use of marketing exclusivities by pharmaceutical companies, linking the approval of new drugs to the demonstration of superior value and reducing the duration of patents on drugs. He argued that pharmaceuticals were simply too vital to the health and well-being of Americans to be universally protected by 17-year-old patents, and calculated that manufacturers should be able to recoup the real investment in research and development in a shorter time frame – perhaps as short as three years. years. Under Kefauver’s bill, drugmakers would only receive patents and other market exclusives if they demonstrated that their new products were significantly more effective than existing drugs. The senator cited countries like Norway and the UK where approval, reimbursement and access were linked in a system that ensured the quality and relative value of therapeutics, while maintaining accessibility for all. the citizens.

An alarmed pharmaceutical industry has launched a national public relations and publicity blitz. The American Pharmaceutical Manufacturer’s Association smeared Kefauver’s efforts by “just another proposal to kill the goose that lays the golden eggs of progress”, and the group and its allies attacked Kefauver’s proposal as a socialized medicine system — a loaded term during a Cold War moment when voters equated everything socialized with the decidedly un-American Soviet Union. For a Cold War liberal like Kefauver, the comparison was irrelevant. The senator countered that drugmakers were the ones getting handouts from the federal government in this case — all he was proposing was to remove barriers to a free and competitive market.

Kefauver, however, had misjudged the interests of US regulators who did not want to tie patents to comparative efficiency. Ultimately, the senator’s own party ended up undermining his efforts, when the Kennedy administration proposed a narrower bill that established proof of effectiveness as part of the drug approval process.

As a result, the Drug Act that bears Kefauver’s name – the 1962 Kefauver-Harris Amendments to the Food, Drug and Cosmetic Act – paradoxically helped to decouple the purchasing power of the federal government from its role in supporting patent monopolies. Kefauver’s hearings ended up setting the stage for the opposite of what he wanted to achieve: extensive federal monopoly protection as an essential, almost naturalized feature of American drug policy.

After 1962, the FDA’s new sequence of clinical trials increased the time and expense required to bring a new drug to market. This lent more weight to industry arguments that pharmaceutical companies needed to earn higher profits, charge higher prices – and even benefit from longer patent protections – in order for investment in innovation to flow. continue. These claims were accepted into federal law in 1984, when the Hatch-Waxman Act extended the term of prescription drug patents to five years.

Every decade since, Kefauver has witnessed major Senate investigations into the pricing practices of the pharmaceutical industry. All sparked outrage, but none changed the underpinnings of a system that decouples the technical aspects of drug approval from purchase value, coverage and pricing decisions.

During the same period, the federal government gradually assumed a much larger role in payment for pharmaceuticals. When Congress enacted Medicare in 1965, amazingly, it was Senate Republicans who pushed for the federal program to include some form of outpatient drug coverage. Still, cost issues prevented the proposal from making it into the final bill. President Lyndon B. Johnson instead established a Medicare Prescription Drug Task Force in 1967, but the Nixon administration subsequently ignored its recommendations in the early 1970s.

In 1988, a Democratic Congress approved — and then repealed — the Medicare Catastrophic Coverage Act, which included a prescription drug benefit, as outraged seniors protested a potential fee hike. The failure of President Bill Clinton’s efforts in 1993 and 1994 to achieve universal health care – including universal prescription coverage – has again brought attention to the high cost of prescription drugs.

Then, in 2003, a Republican Congress and President George W. Bush finally granted a prescription drug benefit to seniors. But many immediately observed that the big winners were not the seniors, but the pharmaceutical companies, because the bill gave them millions of new consumers, without the government directly administering the benefit or having any mechanism to control drug prices.

The measure embodied the half-century trajectory away from Kefauver’s vision of coupling drug approval with pricing and reimbursement. And his detractors were right. Since Medicare’s prescription drug benefit began in 2006, Part D spending on pharmaceuticals has become the fastest growing healthcare expense, swelling of a negligible amount in 2005 to 18% of total U.S. pharmaceutical spending by the end of its first year and 30% by 2017, for a projected total of $111 billion in 2022. This has also contributed to the lopsided boom of a new framework of unsustainable drugs. Only 11% of prescriptions filled now generate no less than 60% of these expenses.

The Inflation Reduction Act aims to change that. The law will allow the Secretary of Health and Human Services to negotiate lower prices for the top 10 drugs by sales volume in 2026. These negotiations are expected to save the government nearly $100 billion by 2031. But while that’s a stunning achievement for the legislation deemed dead in the water just weeks ago, it’s also a limited achievement. The law limits negotiations to 10 drugs in the first year, up to a total of 70 drugs by 2029 depending on how it is implemented. But that doesn’t apply to newly approved drugs in their first nine to 13 years of market exclusivity. And manufacturers have proven adept at toying with previous legislation, abusing the Hatch-Waxman Act to create “pay to delay” monopolies after expiry of patentsand to distort the aims of the orphan drug law by charging higher prices for blockbuster drugs. They will no doubt work quickly to circumvent the Inflation Reduction Act as well.

Tuesday’s action is a critical first step to removing the roadblocks that have prevented the federal government from achieving the price reductions that come with purchasing power. But this is only a first step. It will take sustained attention to increase the price bargaining space of this measure to ensure sustainable, long-term savings on essential medicines for America’s seniors. Even then, it can only do a fraction of what Kefauver envisioned in the late 1950s – above all, require a demonstration of value if manufacturers want a monopoly on the production of a drug. Only by picking up this element of Kefauver’s forgotten program can we hope to stem the unsustainable rise in pharmaceutical costs that threaten us all.


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