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Saturday April 20, 2024

Pharmas challenge drug price negotiations in Medicare: Here's what you need to know

Merck, S Chamber of Commerce filed separate lawsuits against US govt arguing negotiating drug prices in Medicare is unconstitutional

By Web Desk
June 15, 2023
A representational image of medicines can be seen. Unsplash/File
A representational image of medicines can be seen. Unsplash/File

The US federal government is set to announce the first-ever price negotiations for 10 drugs in Medicare in less than three months. However, pharmaceutical companies and their supporters are attempting to prevent this from happening.

Last week, Merck and the US Chamber of Commerce filed separate lawsuits against the government, arguing that negotiating drug prices in Medicare is unconstitutional in various ways. 

The Biden administration is refuting these claims, stating that the Constitution does not prohibit Medicare from negotiating drug prices. Legal experts believe that it will be challenging for the challengers to win their cases.

Historic new power for Medicare

The Inflation Reduction Act, which was passed by congressional Democrats last summer, fulfilled the party's long-standing goal of allowing Medicare to negotiate the prices of certain expensive drugs bought at pharmacies and administered at doctors' offices. 

While the provision was not as comprehensive as some Democrats would have liked, it does allow Medicare to use its bargaining power to lower the cost of medications for the federal government and senior citizens. 

However, it's uncertain how many beneficiaries will see savings in any given year. 

The Health and Human Services secretary can negotiate the prices of 10 drugs for 2026, and another 15 drugs for 2027 and again for 2028. The number rises to 20 drugs a year for 2029 and beyond. 

Only medications that have been on the market for several years without competition are eligible. 

The Centers for Medicare and Medicaid Services will select only Part D drugs that are purchased at pharmacies for the first two years of negotiations. It will add Part B drugs, which are administered by doctors, to the mix for 2028. 

The agency outlined in March how the negotiation process will proceed and launched a 30-day comment period on key implementation elements. 

It will publish the first 10 Part D drugs selected for negotiation on September 1 and give their manufacturers a month to decide whether to sign agreements to participate. CMS will make a final written offer by July 15, 2024, which drugmakers must either accept or reject by the end of the month. 

CMS will publish the negotiated maximum fair prices on September 1, 2024, and they will become effective at the start of 2026.

Lawsuits

The issue of allowing Medicare to negotiate drug prices is a complex one. Merck and the US Chamber of Commerce argue that the provision violates constitutional protections and threatens the development of new medications. 

Merck filed a complaint in US District Court, arguing that the program is a "sham" and violates the Fifth Amendment's "takings" clause. 

The company also claims that the negotiation process coerces manufacturers into agreeing to a government-dictated price and violates the First Amendment. 

On the other hand, supporters of the provision argue that it is necessary to reduce the cost of medications for patients. 

They argue that pharmaceutical companies are charging exorbitant prices for medications and that Medicare should be allowed to negotiate prices to reduce costs for patients.

 The provision is expected to reduce the cost of medications for patients, but it may also reduce the profits of pharmaceutical companies.

Courts and a tough road ahead 

The Biden administration is confident that it will succeed in court regarding the provision allowing Medicare to negotiate drug prices. Legal experts believe that the challengers' arguments are weak. 

The "takings" clause, which Merck is basing its claim on, prohibits the government from taking private property for public use without just compensation. 

However, it is an extraordinary leap to say that patents are private property, according to Robin Feldman, a law professor at the University of California.

Furthermore, drugmakers are not forced to participate in the negotiations, so the federal government is not taking their patented medications. 

The US Chamber of Commerce's standing to bring a lawsuit is also in question. While the professors acknowledge that some claims made by Merck and the chamber could be more challenging for the government, they believe that the provision is necessary to reduce the cost of medications for patients. 

It is likely that other drug companies will file lawsuits as well, given their large profits.