Price caps on 10 US drugs to be negotiated

Medical aid and medical insurance in the United States are in a mess, and people in the richest economy are forced to pay more than others in the world for their health needs. The problem has become acute after Covid-19 and the rough patch that the US economy is going through.

The Democrats have been trying time and again, and quite unsuccessfully, to help the people and make big pharma companies to pay. But at last something is beginning to happen on the front. The Biden administration has released a list of 10 top drugs which are very highly priced and mostly owned by the big pharma whose price will be negotiated.

It is estimated that the negotiation with the government will bring down the prices of the critical drugs used by those above the age of 65 by 25 per cent, and it could be even more. Of course, it is not going to be a smooth bargain. The companies are planning to challenge the move in the courts. It is Biden’s Inflation Reduction Act (IRA) which allows Medicaid to bring the drugs into the negotiable process for the senior citizens in the country.

Biden has in a statement said, “There is no reason why Americans should be forced to pay more than any developed nation for life-saving prescriptions just to pad Big Pharma’s pockets.” It is believed that Biden would use this as a campaign theme as he readies to fight the 2024 presidential poll. It is estimated that if the negotiations go through, then the cost of drugs will decrease for 9 million older citizens who had to pay $6,497 out-of-pocket per year.

Medicines which are on the list deal with prescription drugs for diabetes, arthritis, leukaemia, and the big pharma companies which sell them are Pfizer, Johnson & Johnson, Astra Zeneca, Merck, Novartis among others. The US Centres for Medicare and Medicaid spent $50.5 billion on the 10 drugs between June 1, 2022 and May 31, 2023 even as the 10 listed drugs were being determined for negotiation. It is hoped that Medicaid will save $25 billion per year by 2031. Strangely, US laws prohibit Medicaid from negotiating drug prices.

The legal battle has already begun with the US Chamber of Commerce filing a suit in a Ohio federal court seeking an injunction against price caps. And other big pharma companies like Johnson & Johnson, Merck, Britain’s Astra Zeneca and Germany’s Boehringer Ingelheim have sued the US Department of Health and Human Services (HHS) in a bid to put the price-setting process in trouble.

It is apparent that Republicans oppose capping the drug prices because it is seen as interfering with the market process. The argument is that the prices will come down any way in a few years’ time when competition grows. Meanwhile, the Republicans as well as the big companies do not want any interference from the government. But there is growing realisation that ordinary Americans cannot afford the high prices of the critical drugs, and the government through Medicaid feels the pinch of the high prices.

The drug companies would say that they have to spend billions of dollars in research and development of new drugs, and it takes many years to achieve a breakthrough. Therefore, the drug companies need to charge more and make up for the costs. The truth however is that the drug companies do spend huge amounts for discovering new drugs, but they make disproportionate profits in selling them. In Britain and in the European Union (EU) there is regulation of private businesses, and they are within reasonable limits. It is only in the US that private businesses face no regulation with regard to prices.