The United States Chamber of Commerce is the largest lobby group in the United States. Recently, it filed a lawsuit against the Department of Health and Human Services (HHS), asking it to cancel the new drug price negotiation plan that will take effect this year. If the drug price negotiation plan is not prohibited, the United States will announce the first batch of ten drugs subject to new regulations on September 1, 2023, and relevant pharmaceutical companies will have 30 days to sign agreements with HHS.

Confrontation

Earlier this week, Merck Pharmaceuticals sued HHS and its minister Xavier Becerra. Both sides claim that the plan does not constitute fair negotiations, but rather implements price control. Although the purpose of the plan is to reduce the drug prices of medical insurance beneficiaries, Merck and the Chamber of Commerce both claim a series of unconstitutional actions.

Xavier Becerra

In a statement, the Chamber of Commerce called for "government price controls to harm patients, limit their access to medication, and stifle innovation in the United States. In addition, the new provisions in the Inflation Reduction Act (IRA) violate the basic protection of free enterprise in the United States Constitution, which will have far-reaching implications in the future.

According to this regulation, pharmaceutical companies must reach an agreement to provide their products to Medicare beneficiaries at a discount of 25% to 60%. If the pharmaceutical company refuses the price range, a daily consumption tax will be levied, starting at 186% and ultimately reaching 1900% of the daily revenue of the drug, which is a devastating figure. The regulation also prevents pharmaceuticals from evading punitive consumption taxes through other means by retaining eligibility for Medicaid and Medicare plans.

The first claim claimed by the Chamber of Commerce violated the Separation of powers because the court was prohibited from reviewing HHS's decision on what price to offer. The IRA concentrates enormous and unreviewed power in the hands of one administrative agency, without proper routine regulatory procedures, to determine the fate of the $600 billion pharmaceutical industry and every American patient, "the document explains. Like Merck, the Chamber of Commerce also claimed that the plan violated the Fifth Amendment because it deprived private property for free and violated the First Amendment because the so-called price negotiation plan was coercive and totally unequal. The lobbying group also claims that under the Eighth Amendment, the consumption tax is an excessive fine and there is no legislative body supporting the tax. The organization explained: "When the government limits prices, it will limit innovation and endanger access to better treatment - the greatest harm to patients." According to the Chamber of Commerce, Price controls will force pharmaceutical companies to shelve new drug development. Most drugs invested by pharmaceutical companies have not been approved or sold, but they still spend billions of dollars developing these products. Limiting the profitability of drugs that have already been approved and entered the market will force companies to make research and development pipeline cuts that are detrimental to patients, who may face fewer opportunities and longer waiting times for new treatments.

The 10 drugs that may be selected for negotiations are estimated to account for $13.4 billion, accounting for approximately 10% of the $131.6 billion Medicare D net expenditure in 2020 (Figure 1). These 10 drugs are related to 34 similar competitors, accounting for an additional $7.8 billion in 2020 and 6% of Medicare's total net expenditure. Overall, this means that up to 16% of Medicare D portion expenses in the first year of price negotiations may be affected.

Figure 1: Expenditure of Selected Drugs and Similar Competitors

Source: Medical Insurance and Medicaid Service Center, CMS Drug Consumption. The rebate estimate comes from SSR Health. Note: All drugs with asterisks are biological agents; The others are small molecules.

The IRA only allows Medicare to negotiate prices for a limited number of drugs. However, these drugs are one of the most expensive drugs, and the impact of negotiated prices may expand to other competing products of the same kind. Therefore, even these limited negotiations will bring significant savings to patients taking these drugs and taxpayers providing funding for medical insurance.

The common problem facing the world at present is that the Third Industrial Revolution is approaching its end, and the dividends of human technological progress in the past are difficult to maintain economic development and social stability. However, healthcare expenditures are constantly increasing with the global aging population. It is common for governments of various countries to use administrative power to reduce drug prices, and there is no tacit understanding or collusion, because drugs themselves account for a large proportion of healthcare services, And the treatment costs of newly launched drugs are getting higher and higher; On the other hand, the pharmaceutical industry is also subject to the curse of Eroom's Law i [Eroom's Law observed that although technology has improved (such as high-throughput screening, biotechnology, Structural chemistry, and computational Drug design), drug development has become slower and higher over time, and this trend was first proposed in the 1980s. The cost of developing a new drug (including inflation) roughly doubles every nine years.], The era of the pharmaceutical industry where "big players rise together and continue to grow" is coming to an end. Big Pharma's main competitors are not pharmaceutical peers, but various government departments and drug negotiation institutions that control national level medical insurance payment resources. They either hold their noses and accept the so-called negotiation price, or they can split up and withdraw from the mainstream market of negotiations, seeking business opportunities outside.

The wheels of history roll forward, and the trend of the times is vast. Only by following the trend can we stand firm and grasp the future.