Medicare Should Negotiate Drug Pricing at Launch to Avoid Big Pharma Gouging
WASHINGTON, D.C. – Medicare must negotiate drug prices at launch to ensure that patients and health programs get fair prices on prescription drugs at the outset, Public Citizen said in an article published today in Health Affairs Forefront.
In the absence of negotiations, drug manufacturers set unaffordable launch prices and repeatedly impose large price hikes on medicines every year. Price hikes above the rate of inflation for the 15 drugs currently undergoing negotiations cost Medicare nearly $18.5 billion between 2012 and 2023, according to Public Citizen’s research. Out of those 15 drugs, 13 saw price hikes at twice the rate of inflation over the course of about a decade. During that time, nearly half of them doubled in price.
The Inflation Reduction Act (IRA) gave Medicare the ability to negotiate the prices of some prescription drugs. Medicare may only negotiate a fraction of the medicines used in the U.S. and only after the drugs have been given a decade or longer of unmitigated monopoly pricing power. As a result, Medicare still pays far more for prescription drugs than other countries of similar size and wealth.
“A large majority of voters want Medicare to negotiate lower prices on all the drugs it currently buys. Congress should empower Medicare to negotiate drug prices at the time of launch,” said Sarah Karlin-Smith, Access to Medicines research director for Public Citizen and author of the article. “Negotiating prices at launch would ensure that patients and health programs get fair prices on prescription drugs at the outset, instead of facing nearly a decade or longer of high prices set by pharmaceutical companies to maximize their profits at our expense.”
Under the IRA, small-molecule drug prices are not eligible for negotiation until they have been on the market for seven years. For biologic medicines, the corresponding number is 11 years. These delays give drug companies long periods where they aggressively seek to maximize profits with few limits.
Lower prices are not typically available through Medicare until at least nine years after a small-molecule product receives U.S. Food and Drug Administration approval and 13 years for biologic medicines. Pharmaceutical corporations are pushing to delay negotiations on small-molecule drugs even longer.