Gary A. Incaudo, MD

As physicians, we should applaud all efforts to make medications more affordable to improve our patients’ health outcomes. The United States pays more for drugs on average than any other nation, which seems blatantly unfair, especially since most major pharmaceutical breakthroughs worldwide such as the COVID-19 vaccine originate in the U.S. The U.S. pharmaceutical industry spends roughly $100 billion a year in research and development and has contributed to a reduction in death from cancer and heart disease by half over the last 50 years.

On the surface, the recent legislation signed by President Joe Biden seems to be a step in the right direction to expand affordability and availability for a limited group of patients. For the first time, Medicare will be allowed to negotiate prices on a limited number of medications starting in 2026, and Medicare Part D coverage will be capped at $2,000 out of pocket.

Unfortunately, the downside risks, especially for seniors, are not being discussed by politicians or mitigated in this legislation. For example, “negotiate” is an inappropriate term in this legislation. The HHS secretary will pick 10 to 20 of the top Medicare spending drugs each year and establish a price. Drug makers that don’t accept the government’s price will be penalized 95% on their sales. In essence, the government will set the price for a select group of drugs and force a reduction in their return on investment.

The bill also establishes that beginning in January, drug companies must pay a rebate if prescription prices for Medicare recipients rise faster than inflation. To cover that difference from the above, drug companies will most likely find it necessary to raise prices for non-Medicare patients. This will, in turn, force an increase in premiums for health insurance for all non-Medicare patients.

The legislation also makes it difficult for the pharmaceutical industry to decide how to invest in research and development and acts as a disincentive to test treatments for new indications that risk becoming a target for government price control. For example, will it be cost-effective to study an FDA-approved drug that effectively targets a gene mutation for colon cancer on other forms of cancer that share that gene? Should drug companies test therapies on patients as a third-, second- or just first-line treatment? These trials can take many years to complete, by which time the drug could be subject to government price controls and eliminate any return on investment. More darkly, should a pharmaceutical company expand treatment to a small subgroup of patients and expand the pool of patients that benefit from a drug only to fall under the scrutiny of HHS and be subject to future price controls? The government use of price controls is a slippery slope whose long-term outcome is difficult to predict. A University of Chicago study by economist Tomas Philipson analyzed a more expansive price-control plan considered by the House last year and found it would reduce available research dollars by $663 billion over the next 17 years and would lead to 135 fewer drugs being released for use. The loss from the lack of drug innovation was 331 million years of life, or 31 times the loss from COVID-19 at the time of the study.

What will be the unintended consequences to our patients from the current, more limited legislation? Drug innovation that emanates from the U.S. pharmaceutical industry and expansion of medical indications for individual treatments is vital to our patients’ health. One way or another, good or bad, our patients will pay a price for any price controls imposed by government.

Reference:

Philipson TJ, Durie T. Working paper No. 2021-108. The evidence base on the impact of price controls on medical innovation. https://bfi.uchicago.edu/wp-content/uploads/2021/09/BFI_WP_2021-108.pdf. September 2021. Accessed August 22, 2022.

Rita K. Kuwahara, MD, MIH

As physicians, we have advocated for years to make medicines affordable for our patients, as it is unconscionable that our patients must choose between buying their lifesaving medicines and keeping a roof over their heads.

Today’s enactment of the Inflation Reduction Act of 2022 represents a historic step forward for our nation and gives us the tools to begin to meaningfully improve our patients’ access to affordable medicines and care, as well as to start addressing the health effects of climate change.

We must applaud our members of Congress and President Biden for coming together to pass and sign the Inflation Reduction Act into law, and while it is important to celebrate this landmark achievement, our work is only just beginning.

For the first time, Medicare will be allowed to negotiate the prices of 10 medicines in 2026 and 20 medicines in 2029, and starting in 2025, those with Medicare Part D coverage will have their annual out-of-pocket spending on prescription drugs capped at $2,000. Further, people with diabetes covered by Medicare will have access to insulin for $35 per month. In addition, middle class families will continue to be eligible for subsidies on the ACA marketplace for another 3 years, first enacted by the American Rescue Plan, making access to health care affordable for more families and preventing families from losing health insurance coverage. As a nation, we are also making a critical investment in tackling climate change, which will be important in subsequently addressing the associated health effects.

Each of these provisions is life-changing for our patients and we must ensure that the Inflation Reduction Act is fully implemented to optimally improve our patients’ health outcomes.

As we enter this next phase of implementation, we must praise HHS and CMS for their commitment to implementing this vital new law, and we must ensure that adequate resources, infrastructure and support are provided to fully implement each of the critical provisions included in the Inflation Reduction Act, so that we may improve the health of our patients and our nation.