Big Pharma is wrong about Medicare’s push to negotiate drug prices

Big Pharma is pulling out all the stops to avoid lowering drug prices for seniors.

Several pharmaceutical companies, including Merck, Johnson & Johnson and Bristol Myers Squibb; the key pharma lobbying group Pharmaceutical Research and Manufacturers of America (PhRMA); and the U.S. Chamber of Commerce have recently filed lawsuits against President Joe Biden’s administration, arguing that the Inflation Reduction Act provision that allows Medicare to negotiate drug prices with pharmaceutical companies is unconstitutional.

Their legal strategy is tantamount to “throwing the kitchen sink at the government,” as one expert described it, with various lawsuits arguing violations to the First, Fifth, and Eighth amendments.

The pharmaceutical industry has argued that negotiating Medicare prices with the federal government will force them to pull back on developing groundbreaking new treatments. As Eli Lilly CEO David Ricks said in an interview this summer with CNBC, “I’m really worried about the harm this will do to new cures and possibilities in medicine.”

This argument has long been parroted — invoked by the American Medical Association in the 1950s and again by the American Hospital Association in the 1970s — aiming to scare Americans into believing they will no longer have access to new cures and innovations if the government, in this case Medicare, negotiates over prices.

The argument relies on a central falsehood: that the government does not subsidize investments in pharmaceutical innovation. But evidence shows that public sector investments in basic and applied biomedical research — primarily from the National Institutes of Health — contribute substantively to the emergence of new drugs and drug-related patents.

Amazingly, given the pervasiveness of the industry’s argument, a recent study found that NIH funding contributed to nearly all (99.4%) of FDA-approved drugs from 2010 to 2019, and the magnitude of NIH investment in new drugs is comparable with that of the industry. These findings clearly suggest that the public deserves a more equitable return on its investment relative to the pharmaceutical industry’s investment.

The problem is that the public is largely unaware of the magnitude of its investment and the substantial role it plays in creating new and innovative medicines. This is just one example of a much larger grow-and-hide phenomenon in the U.S., in which the government increasingly funds an ever-growing health care system and yet hides its substantial role.

We Americans are told repeatedly that we have a predominantly private health care system. Official national health expenditure reports suggest the government funds 49% of total expenditures. But if you add up all hidden public subsidies to the private sector, the government funds at least 60% of total national health expenditures, and this is almost certainly an underestimate. Most point to public insurance to describe the government’s role in health care, but it is far more widespread — not only for pharmaceuticals but throughout health care infrastructure.

The public’s misunderstanding about the role of government in health care is not an accident. The scope of public funding is intentionally hidden from the American public. First, and not unexpectedly, most companies actively hide the subsidies they accept from government (and for which they often aggressively lobby). Pfizer, for example, misleadingly claims it did not receive any government research funding to develop its COVID-19 vaccine, but its partner, BioNTech, was founded based on the NIH-funded mRNA discovery. BioNTech also received $445 million from the German government to assist with vaccine development.

But, second, and much more surprising, the federal government consistently fails to advertise the important role it plays in subsidizing the U.S. health care system, including research and development for drug innovation.

Instead, when the industry claims that price negotiations will result in fewer cures, the retort is focused on the importance and extent of the reduction in new drugs. For example, proponents of Medicare price negotiations cite a Congressional Budget Office report that found that the law would result in only one fewer drug approval over the next 10 years. Yet, no one points to the fact that the reason price negotiations will not result in less innovation is because taxpayers already pay for the basic research that leads to the development of new drugs.

When Americans do know the extent of government subsidies, they act. The government’s massive investment through Operation Warp Speed to create a COVID-19 vaccine created a rare opportunity for collective organizing about drug pricing and access. Activists protested as early as August 2020, demanding that the Moderna vaccine be made affordable. There were also protests about Moderna’s unwillingness to share its vaccine technology with poor countries.

Investments made by the NIH and other federal health agencies do extensive work on the front end for the American people. Instead of communicating this significant role to the public and fighting to secure access to the medical cures and discoveries that result from our investment, the government is often cowed by moneyed interests in health care. For example, NIH was extremely timid in fighting for its joint patent with Moderna.

It is time we rethink how and when the government communicates the true nature of its role. The public needs to know that it has already invested in new drug development, and the magnitude of that investment, so it can then understand that Medicare price negotiations must take into account public and private investments to ensure a fair return for the American people.

The first step toward true reform is to reveal what is currently hidden from the American public. Intentionally obscuring the public’s investment gives moneyed interests such as pharmaceutical companies the power to claim “new cures” will be imperiled if they are forced to negotiate. This fearmongering demands legislation aimed at transparency that would clearly detail all government subsidies to private actors, and a reformed discourse that debunks the myth that our health care system is “predominately private.”

Colleen Grogan is a professor of health policy at the University of Chicago and the author of “Grow and Hide: The History of America’s Health Care State.”

Submit a letter, of no more than 400 words, to the editor here or email letters@chicagotribune.com.

No Byline Policy

Editorial Guidelines

Corrections Policy

Source