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Strong industry resistance, but companies negotiated
Despite their vocal opposition and their ongoing public relations campaign that has attacked this process, all affected U.S. drugmakers decided to engage in the price negotiations.
The daunting alternatives, including paying a penalty that could run as high as 95% of their U.S. pharmaceutical product sales, and a requirement to pull their drugs from the Medicare and Medicaid markets, proved to be strong incentives.
However, the manufacturers of medications have been fighting the measure in court. And despite several losses, this battle will likely continue for the foreseeable future, with uncertain outcomes.
Why US drug prices are so high
Americans pay substantially more for prescription drugs compared with people who live in countries with similar economies. For example, per capita pharmaceutical spending in the U.S. amounted to $1,432 compared to $1,042 in Germany and $766 in France in 2022.
The reasons for this disparity are multilayered and include the overall complexity of the U.S. health care system and the lack of transparency in the drug supply chain. Of course, many other countries also directly set prices for drugs or use their monopoly over health services to drive down costs.
Drug costs impose a big burden on Americans. People who are 65 and older are particularly affected, with 1 in 5 not taking all of their medications as prescribed due to high costs.
The first 10 drugs selected for negotiated pricing can be picked up at a pharmacy.
Weighing the prospects of price negotiations
In my view, the government’s efforts are a step in the right direction. The potential for real savings for Americans 65 and older will undoubtedly grow as more drug prices are negotiated.
Yet, some real concerns remain.
Even if the negotiated lower prices survive the industry’s legal challenges, it’s possible that future Republican administrations won’t embrace this policy, as Republicans have historically opposed price negotiations for Medicare.
The true effect for patients with Medicare will likely be much smaller than it appears. That’s because the Medicare program and patients often already receive discounts on many of these drugs. These discounts will now be eliminated.
In addition, the pharmaceutical industry has a history of skillfully exploiting loopholes that may further limit the financial impact. Manufacturers have already told shareholders that they expect limited impacts on their profits.
It’s also too soon to tell if this is going to be a win for all Americans. It’s possible that Americans who aren’t covered by Medicare may actually see prices go up, even on these same drugs. Working Americans could thus wind up shouldering ever larger burdens to deliver this support for older adults.
This article includes passages that were included in a previous article published on Aug. 30, 2023.
Simon F. Haeder does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.
Source: The Conversation
