“Later this year, the federal government is supposed to start a serious attempt to rein in drug prices: For the first time, Medicare will negotiate with pharmaceutical companies over the prices it’s willing to pay for a short list of drugs. It’s a long-awaited change that is supposed to save the government and patients billions of dollars over time.
But the drug industry is now launching a legal fight aimed at stopping Medicare’s negotiations over prescription drug prices before they begin. The stakes are higher than just a drug price reform: The case could set an important precedent for the government’s authority to try to constrain health care prices.”
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“The Merck lawsuit focuses on the Constitution’s takings (or compensation) clause in the Fifth Amendment, which protects private owners from having property taken without “just compensation” by the government. It also raises First Amendment claims centered on the law’s requirements that drugmakers not disclose information they receive from the government as part of the negotiations. The Chamber of Commerce’s case rests on a constitutional right to due process, arguing that, because the Medicare negotiations are exempt from review by the courts under the IRA, drugmakers are being denied due process.
Taken together, the lawsuits give any judges predisposed to side with private industry over the federal government a few options for a legal foundation upon which to base a decision in pharma’s favor.
A number of legal experts say they are skeptical of these arguments. Merck’s takings clause case turns on defining a patent — an issuance from the government — as private property subject to the just compensation clause, said Robin Feldman, a law professor at UCSF, a difficult assertion. She also said the premise present in both cases — that the federal government as a health care purchaser through Medicare can’t say no to the companies it purchases drugs from and can’t dictate prices as the consumer — is “problematic.”
“It can’t be that the government as a buyer has to pay whatever a seller wants to charge,” she said. “That the government could be forced to spend itself into bankruptcy.”
Regarding the chamber’s due process claim, several legal experts have pointed out that Medicare’s various contracts with health care providers are already often generally exempted from judicial review. It is understood that this is necessary to allow the program to function; the government, as the administrator of the program, needs that authority without each of its decisions being subject to litigation.”
“There are few better emblems of the failures of the US system of medical care than its inability to consistently provide insulin to Americans who need it.
The drug was discovered 100 years ago, and it provides essential and ongoing treatment for millions of people living with diabetes, one of the most common chronic diseases in the country. And yet one in six Americans with diabetes who use insulin say they ration their supply because of the cost. Some people end up spending nearly half of their disposable income on a medicine they must take to stay alive.
Though insulin generally costs less than $10 per dose to produce, some versions of the drug have a list price above $200. This is in part because, in the US, a warped market has allowed three companies to dominate the insulin business.”
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“With California leading the way, a handful of states are considering trying to disrupt the market for essential medications, starting with insulin. The plan would be to manufacture and sell insulin themselves for a price that is roughly equivalent to the cost of production.”
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“Medicare, the federal health insurance program for seniors, is about to institute a $35 per month cap on insulin costs for its beneficiaries, a provision of the Inflation Reduction Act that Democrats passed last year. But, because of the Senate’s arcane rules, they could not establish the same cap for private insurance, which covers more than half of Americans.”
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“The main mechanism the US has for bringing down prescription drug prices is allowing generic drugs to compete with brand-name versions. When a company develops a new drug, it gets a period of exclusivity, 10 years or more, in which it is the only one able to make or sell that drug. But after that exclusivity period has passed, other companies can make a carbon copy and sell it at a lower price. Studies find that once several generic competitors come on the market, prices drop significantly.
But pharma companies are savvy about finding ways to extend their monopolies, with insulin and other drugs, by making minor tweaks to the chemical compound and asking for a patent extension. In the case of insulin, the companies can also modify the delivery device to protect their market share. Each product is meant to be used with specific, company-designed injectors. Though the patents on the artificial insulin developed in the 1990s have started expiring, these companies continue to hold and extend monopolies on either their devices or other chemical compounds, making it harder for generic competitors to enter the market.
Other federal regulations have added to the challenge. The FDA began to treat insulin as a biologic drug in 2020 — meaning it is made with living materials instead of combining chemicals like conventional pharmaceuticals — which comes with a different set of standards for generic versions, which are known as biosimilars, as well as manufacturing challenges given the precise conditions these products must be made in. Biosimilars can cost up to $250 million to produce and take up to eight years to bring to the market, versus a one-year investment of as little as $1 million for conventional generics. And unless the FDA recognizes a new generic insulin as interchangeable with the products already on the market, health insurers might not want to cover it and doctors may not be willing to prescribe it.
To add one more layer of difficulty, the current manufacturers can always decide to drop their prices to crowd out new generic competitors, given the gap between the retail price and the $10 cost of production. The first biosimilar drugs have come onto the market in the past few years, but only one of them has been deemed interchangeable with the brand-name version; ultimately, in late 2021, it was priced at only $20 less than the brand-name insulin it was competing with. More competition is needed to meaningfully depress prices.”
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“If manufacturing a cheap generic insulin proves viable for California, the consequences could be enormous and stretch far beyond insulin. California would provide proof of concept, and a fledging public marketplace for public pharmaceutical production could potentially emerge.”
“Methotrexate is a fairly common drug that treats a wide range of medical conditions. I take it to help control an autoimmune disorder. So do about 60 percent of rheumatoid arthritis patients. It is used to treat some cancers, such as non-Hodgkin lymphoma. It also has at least one other important medical use.
The drug is the most common pharmaceutical treatment for ectopic pregnancies, a life-threatening medical condition where a fertilized egg implants somewhere other than the uterus — typically a fallopian tube. If allowed to develop, this egg can eventually cause a rupture and massive internal bleeding. Methotrexate prevents embryonic cell growth, eventually terminating an ectopic pregnancy.
And so many patients who take methotrexate say they have become the latest victims of the Supreme Court’s decision in Dobbs v. Jackson Women’s Health Organization — the decision overruling Roe v. Wade.
It’s unclear how widespread this phenomenon is, though the problem is serious enough that the Arthritis Foundation put out a statement warning that “arthritis patients who rely on methotrexate are reporting difficulty accessing it,” and that “at least one state — Texas — allows pharmacists to refuse to fill prescriptions for misoprostol and methotrexate, which together can be used for medical abortions.”
In some cases, pharmacists are reportedly reluctant to fill methotrexate prescriptions in states where abortion is illegal, and doctors are similarly reluctant to prescribe it. In other cases, pharmacists may refuse to fill valid methotrexate prescriptions because they personally object to abortion, even in states where the procedure remains legal.”
“the majority of active pharmaceutical ingredients (APIs) consumed by Americans were produced right here in the United States, according to a recent report from the health care consulting firm Avalere. When it comes to foreign supply chains, about 19 percent of the active ingredients used in America’s drugs come from Ireland. China accounts for just 6 percent.”
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“Before risking hundreds of millions of taxpayer dollars on loans to companies with unproven track records of producing pharmaceutical drugs or their chemical components, you might expect the White House to assess the seriousness of the underlying problem it is hoping to solve. But so far, all the available evidence suggests that China is not responsible for making most—or even much—of America’s pharmaceutical drug supply. Lobbyists and politicians are using a manufactured crisis to advance their own interests.”