Undeterred by a growing number of lawsuits, the Biden administration on Friday released revised guidance for Medicare's new drug price negotiation program.
The latest guidance outlines how the Centers for Medicare and Medicaid Services will negotiate with drugmakers to reach agreement on a maximum fair price for a selected medicine, the agency said. It was informed by public input on the initial guidance the agency released in March, which explained how it will select the drugs and how the negotiations will be conducted.
The program, which was authorized by the Inflation Reduction Act that congressional Democrats passed last year, has prompted a fierce backlash from the pharmaceutical industry. Two drug manufacturers and two industry groups have filed lawsuits, arguing the measure is unconstitutional.
But the administration is not backing down from implementing its historic new power. It intends to keep its timeline of announcing the first 10 drugs that will be selected for negotiation by September 1. CMS and the drugmakers will negotiate during 2023 and 2024. The prices will be effective starting in 2026.
"The Biden-Harris Administration isn't letting anything get in our way of delivering lower drug costs for Americans," Secretary of Health and Human Services Xavier Becerra said in a statement. "Pharmaceutical companies have made record profits for decades. Now they're lining up to block this Administration's work to negotiate for better drug prices for our families. We won't be deterred."
The initial set of drugs will be chosen from the top 50 Part D drugs that are eligible for negotiation that have the highest total expenditures in Medicare. CMS will consider multiple factors when developing its initial offer, including the drugs' clinical benefits, the price of alternatives, research and development costs and patent protection, among others.
If drugmakers don't comply with the process, they will have to pay an excise tax of up to 95% of the medications' US sales or pull all their drugs from the Medicare and Medicaid markets. The pharmaceutical industry contends that the true penalty can be as high as 1,900% of sales.
Mounting lawsuits
Merck, Bristol Myers Squibb, the Pharmaceutical Research and Manufacturers of America, known as PhRMA, and the US Chamber of Commerce have all recently filed lawsuits in federal courts across the US. They each argue the program is unconstitutional in various ways.
The challengers also say that the negotiation provision will harm innovation and patients' access to new drugs.
Among the arguments are that the program violates the Fifth Amendment's "takings" clause because it allows Medicare to obtain manufacturers' patented drugs, which are private property, without paying fair market value under the threat of serious penalties.
Plus, the negotiations process violates the First Amendment, the challengers say, because it coerces manufacturers into saying that they agree to the price that the government has dictated and that it's fair.
Another argument is that the process violates the Eighth Amendment by levying an excessive fine if drugmakers refuse to negotiate and continue selling their products to the Medicare market.
Merck expects its diabetes drug Januvia to be among the drugs named in September and its blockbuster cancer treatment Keytruda and diabetes drug Janumet to be subject to negotiation in the future. Bristol Myers Squibb believes its blood thinning medication, Eliquis, will be subject to negotiations this year, and its cancer medication, Opdivo, will be selected in a subsequent round.
"The price setting provisions in the IRA are bad policy," PhRMA CEO Stephen Ubl said in a press conference last week. "They threaten our industry's ability to research and develop new treatments and cures. They put access to innovative medicines at risk for Americans today and in the future. And they jeopardize providers' ability to prescribe the treatments they believe are in the best interest of their patients."