The Drug Industry Just Launched An Attack On Biden's Prescription Drug Reforms

A lawsuit that PhRMA filed Wednesday is the latest fusillade against one of the president’s biggest domestic achievements.

Pharmaceutical companies and House Republicans have aligned to launch a full-scale attack on the new Medicare drug reforms, which represent one of President Joe Biden’s signature accomplishments and have already started to lower prescription costs for seniors.

The pharmaceutical industry is challenging one key component of the new prescription drugs initiative in court, while a caucus representing most House Republicans is calling to repeal the entire program through legislation. They argue that the reforms will reduce investment in research and development and ultimately lead to fewer breakthrough cures.

The legal challenge officially got a new and powerful champion on Wednesday when the industry trade group PhRMA filed a lawsuit claiming that the new law’s best-known feature violates the Constitution in multiple ways.

That provision gives the federal government authority to negotiate the price of a limited set of drugs in Medicare. Although seniors wouldn’t see newly lowered prices until 2026, the negotiation process begins in September, and PhRMA wants the courts to intervene before then.

PhRMA filed the lawsuit jointly with a pair of advocacy groups, the National Infusion Center Association and the Global Colon Cancer Association, whose representatives also appeared on a Wednesday conference call announcing the lawsuit.

Both groups include drugmakers among their corporate supporters, and Democrats were quick to denounce the lawsuit as a play by the pharmaceutical industry to maximize profits at the expense of seniors struggling to pay what are the highest drug prices in the world.

“The Pharma lobby is upset that I’m forcing them to bring prices down,” Biden tweeted late Wednesday. “And to that I say: Bring it on.”

An Argument About Law And The Meaning Of ‘Coercion’

PhRMA’s lawsuit is the fourth major legal challenge to the new law. The drug manufacturers Merck and Bristol Myers Squibb have each filed lawsuits already, as has the U.S. Chamber of Commerce, a conservative group representing business interests.

The lawsuits differ in the particulars, but take the same general approach, asserting that the new initiative exceeds the authority of Congress ― and violates the rights of manufacturers ― by effectively forcing drugmakers to sell their drugs at prices the government sets and without sufficient procedural protections.

“It is a government mandate disguised as negotiation,” PhRMA’s brief states. “And it is unconstitutional.”

Merck’s brief is even blunter, arguing that the new program is “tantamount to extortion.”

In the weeks since Merck filed that initial lawsuit, a number of legal experts have said they think the industry claims are weak ― arguing, among other things, that manufacturers unhappy with negotiated prices have the option of withdrawing from Medicare altogether.

“We remain very concerned about the impact this law will have on patients and future innovation.”

- Stephen Ubl, PhRMA

“Participation is really lucrative for them, so they may not want to walk away, and that’s fine, but it doesn’t follow that they’ve been coerced,” University of Michigan law professor Nicholas Bagley told HuffPost.

Whether the industry’s arguments prevail will, as always, come down to how individual jurists interpret the Constitution and past precedent.

One of PhRMA’s more specific claims is that the new law delegates too much power to the executive branch. That argument could appeal to conservative judges and, eventually, conservative Supreme Court justices who have been sympathetic to such arguments in other contexts.

But courts have long recognized the federal government’s authority to require that providers of medical care — or producers of medical goods — meet certain conditions if they want to sell their wares to Medicare and its beneficiaries.

Asking judges to side with the industry in this case may mean asking them to overturn those precedents ― or, at least, to interpret them in a novel way ― and even some philosophically sympathetic judges may balk at that.

An Argument About Innovation And Federal Policy

PhRMA’s lawsuit comes one week after the Republican Study Committee, whose membership roster includes more than three-fourths of all House Republicans, called for repealing all of the new Medicare pharmaceutical reforms.

That would mean eliminating not just the negotiated prices but also three features that the lawsuits do not challenge: a cap on insulin prices, a new limit on out-of-pocket spending for drugs, and penalties on manufacturers who raise prices faster than inflation.

But there’s no divergence between the industry and Republicans when it comes to the impact of price negotiation, which they say will reduce drug company profits enough to reduce the investment that underwrites innovation.

“We remain very concerned about the impact this law will have on patients and future innovation,” PhRMA President Stephen Ubl said during a Wednesday conference call to announce the lawsuit.

“It’s no surprise that Big Pharma wants to stop Medicare from negotiating lower drug prices on behalf of American seniors.”

- Sen. Ron Wyden (D-Ore.)

To bolster their case, opponents of the Democratic drug reforms have been citing an industry-funded study from a research organization called Vital Transformation arguing that only a fraction of recent breakthrough drugs would have come to market if the new policies had been in effect.

Other consulting groups, researchers and industry officials have made dire predictions of their own. And during Wednesday’s conference call, Ubl said he’s already hearing from industry leaders who think the new regulations are deterring investment.

But whether — and how — government intervention in drug pricing actually affects innovation has been the subject of longtime debate.

Many experts say the fears of depressed innovation are misplaced, especially when it comes to the actual reforms that became law in 2022, given that the new law covers only a limited group of drugs in a limited set of circumstances.

The Congressional Budget Office predicted the new reforms would reduce total drug output by just 1% over the first 30 years.

And a new paper that appeared in the journal Health Affairs Scholar on Wednesday noted that Biden and the Democrats passed additional pieces of legislation increasing the federal government’s overall support for basic scientific research. That could actually lead to more breakthroughs rather than fewer, the paper’s authors speculated.

As for warnings that the drug reforms will discourage investors, Richard Frank, director of the USC-Brookings Schaeffer Initiative for Health Policy and a co-author of that new paper, told HuffPost that he’s seen no sign of diminished profit expectations in the financial filings he’s been reviewing recently.

“I just think that what they claim in the Congress and in the courtroom is really different from what they claim on Wall Street,” Frank said.

A Political Fight That Should Feel Familiar

The new prescription drug reforms were part of the Inflation Reduction Act, the signature piece of domestic legislation that Democrats passed on a party-line vote in 2022 following more than a year of debate on Capitol Hill.

But the drug pricing piece of the legislation was in the works for much longer than that.

An earlier, more ambitious version passed the House back in 2019 when Democrats were in control of that chamber but not the Senate or the White House. And the underlying concept of having the federal government negotiate with manufacturers over drug prices dates back at least to the 1990s when then-President Bill Clinton included such a proposal as part of his ill-fated plan to create a universal coverage system.

That’s a common pattern with health care policy. The biggest legislative accomplishments, like the creation of Medicare and Medicaid in 1965 and the enactment of the Affordable Care Act in 2010, followed decades of effort and fighting – and, ultimately, huge compromises to get the votes necessary for passage.

But enactment has never represented the end of the debate. All of these programs faced ongoing attacks, as “Obamacare” did for years as conservatives tried to get judges to invalidate the law and Republicans tried to round up the votes to repeal it through Congress.

Medicare, Medicaid and the Affordable Care Act survived in part because advocates spent so much time fighting to preserve them in the courts of law and public opinion. Now it looks like the new prescription drug reforms face a similarly existential threat, which means their survival may depend on a similarly effective defense.

“This legal action underscores how critical it is to have a president in the White House who will fight for lower health costs for Americans,” Senate Finance Chairman Ron Wyden (D-Ore.) said on Wednesday. “I have deep concerns that a Republican administration would roll out the red carpet for Big Pharma and once again ban Medicare from negotiating lower drug prices.”

Defenders of the new program have one key asset: Public support. Polls consistently show the reforms are popular, even with Republican voters. But to prevail in the courts, groups like PhRMA don’t have to win over the public. They just have to persuade a few judges.

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