Writer: Remy Waldman
Editor: Kayla Buth
November 2023
At the beginning of 2022, the United States Congress passed the Inflation Reduction Act (IRA), signed by President Joe Biden. The Biden-Harris administration hoped to lower the overall cost of pharmaceutical drugs and certain prescription medications. This act aligned with the Biden legislative agenda goal of improving healthcare in America by putting the negotiation of drug prices in the hands of Medicare and extending expiring healthcare subsidies for three years (Vazquez, 2022). The decrease in drug prices is an effect of the multiple pieces of legislation that have been passed since late 2021 (Kumar, 2022).
The Inflation Reduction Act of 2022 aims to save millions of Americans thousands of dollars per year. For example, this act protects Medicare beneficiaries from high drug costs by phasing in a cap of $35 monthly per prescription for insulin. In January 2023, a $0 out of pocket cost was given to Medicare beneficiaries for adult vaccines. Specific pharmaceutical companies are also required by the IRA to pay Medicare rebates if they increase their drug prices faster than the United States’ overall inflation rate. Additionally, the Secretary of Health and Human Services has been allocated the power to negotiate prices of high-cost prescription drugs (The White House, 2022).
The goal of the IRA is to lower overall healthcare costs in America, however, certain Americans think this act will impact drug discovery and not help the cost of healthcare. Their main argument is that the IRA is vague. The price-negotiation process does not outline how “maximum fair prices'' are determined for certain drugs and excludes certain treatments. Additionally, the act restricts the insurance companies’ ability to carry out measures that control costs, turning away new drug investors. The expected costs and market size determine how much money companies invest in new drugs. If the IRA reduces the net value of investments, healthcare companies will earn less returns on their investment, and fewer investments will be made. Less investments will lead to fewer studies on efficiency, safety, and value of health products (Goldman, 2023).
In July of 2023, Johnson & Johnson became the fourth pharmaceutical company (following Merck, Bristol Myers Squibb and Astellas) to sue the United States government for drug price negotiations related to the IRA. The company claimed that price negotiation by Medicare violates the First and Fifth Amendments of the United States Constitution. Astellas, a Japanese multinational pharmaceutical company, released that the negotiation system violates the “Takings Clause, the Due Process Clause and the First Amendment.” Johnson & Johnson argued that legal remedies would not accurately compensate the brand for their revenue loss from the IRA regulations (Dunleavy, 2023). It is important that while the IRA values the healthcare of Americans, the economics and financial well-being of the entire nation is also considered
Due to the uproar of lawsuits from large drug manufacturers, the Inflation Reduction Act’s future is controversial and unclear. Supporters of the act want to help Americans who feel their hard-earned money is stolen by high price prescription drugs. President Biden and his Administration plan to stand their ground as many express concerns of the act being unconstitutional. As the IRA legislation is addressed, it is vital to prioritize the financial and health well-being of all Americans.
References
Dana Goldman, P., Joseph Grogan, J., Darius Lakdawalla, P., Barry Liden, J., Jason
Shafrin, P., Kyi-Sin Than, M., & Erin Trish, P. (2023, April 19). Mitigating the inflation reduction act’s adverse impacts on the prescription drug market. USC Schaeffer. https://healthpolicy.usc.edu/research/mitigating-the-inflation-reduction-acts-potential-adverse-impacts-on-the-prescription-drug-market/
Dunleavy, K. (2023, July 18). Johnson & Johnson becomes 4th Drugmaker to file suit
against IRA’s drug price negotiations. Fierce Pharma. http://www.fiercepharma.com/pharma/johnson-johnson-becomes-4th-big-pharma-file-suit-against-ira-drug-price-negotiations
Kumar, A., O’Rourke, S. S., Mehta, N., Badlam, J., Silvis, J., & Cox, J. (2022,
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Vazquez, M., & Judd, D. (2022, August 17). Biden signs inflation reduction act into law |
CNN politics. CNN. http://www.cnn.com/2022/08/16/politics/biden-inflation-reduction-act-signing/index.html
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