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Analysis: US moves to negotiate drug prices in rare defeat for Big Pharma

WASHINGTON, Aug 12 (Reuters) – Big pharma has spent more money than any other industry to lobby Congress and federal agencies this year, a Reuters analysis shows, but suffered an even bigger defeat after the government failed to block a bill that would have allowed it to negotiate prices. Select medication.

Although the pharmaceutical industry spent at least $142 million on lobbying efforts, the $430 billion Inflation Reduction Act became law to change climate, health and tax policies. It cleared its biggest hurdle with passage in the Senate last week, with no Republicans joining Democrats in voting for the bill, which passed the US House of Representatives on Friday. [nL1N2ZO2OV]

President Joe Biden will sign the law into law next week. Read more

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The bill’s impending enactment represents a rare legislative defeat for the pharmaceutical industry and sets a precedent for suppressing drug prices in the world’s most lucrative market for drugs, according to congressional and industry officials.

“This is an important first step,” Democratic Senator Patty Murray, chairwoman of the Senate Health Committee, told Reuters. “This is the first time we’ve been able to take a step like this to lower prices on drugs … It sets the stage for us to do more.”

Health policy experts say the bill reflects the pharma industry’s weakening influence over the Democratic Party, and its main argument against price negotiation — which stifles innovation — is no longer persuasive to the public.

A Kaiser Family Foundation poll in October found that 83% of Americans, including 95% of Democrats and 71% of Republicans, want the federal Medicare health plan for seniors to negotiate the bill’s provision.

“The pharma guys were quick to throw everything but the kitchen sink against this,” said Senator Ron Wyden, the Democrat who chairs the Finance Committee.

The industry’s strongest trade association, the Pharmaceutical Research and Manufacturers of America (PhRMA), urged senators in a public letter to reject the bill. Its president, Stephen Ubl, told Politico that lawmakers who vote “don’t get a free pass.”

“Few associations have all the tools of modern political advocacy at their disposal the way PhRMA does,” he said.

A PhRMA spokesperson said the group would continue to work with all legislators. He did not address Ubl’s comments on holding legislators accountable.

“We may not agree on every issue, but we believe engagement and dialogue are important to fostering innovation, a highly skilled workforce and a policy environment that supports patient access to life-saving drugs,” spokesman Brian Newell said in an email.

Pharma Scheme

A Reuters analysis of OpenSecrets’ lobbying and campaign contribution data shows the pharmaceutical industry spent at least $142.6 million on lobbying Congress and federal agencies in the first half of 2022, more than any other industry, and at least $16.1 million on campaign contributions during the current midterm election cycle that began in January 2021.

About two-thirds of the money spent on lobbying, about $93 million, came from PhRMA and its member companies.

It argued that drug promotions do not contribute to inflation, with an average 2.5% rise in drug prices over the past year, compared with a 17% rise in health insurance prices.

Critics say the statistics conflate higher-priced brand-name drugs with lower-priced generics, masking the impact on patient costs. A KFF study estimates that the prices of nearly half of all Medicare-covered drugs will increase faster than inflation in 2020.

The industry has long warned that price restrictions in the US market could hamper companies’ ability to invest in developing new drugs.

With the help of industry-backed Democrats, the bill’s provision for drug price negotiations was rolled back in November, allowing Medicare to focus on a maximum of 20 expensive drugs annually through 2029, rather than 250 early-proposal treatments to help lower prices.

Opponents to the more dramatic curbs are Senator Kirsten Sinema and Representative Scott Peters, the two biggest recipients of industry donations, more than $201,000 and $320,000 respectively, according to OpenSecrets data.

“We’ve created a better place for investors to recoup their investment, which is constantly going to develop new drugs,” Peters told Reuters.

“I still think they got it right on this one.”

what now

Democratic staffers, industry executives and policy experts said the bill’s widespread popularity, combined with pressure on Democrats to pass meaningful legislation ahead of midterm elections in November, helped it overcome the pharma industry’s campaign.

“I guess with this vote, pharma realizes they don’t have a lot of friends among Democrats,” said Larry Levitt, vice president of health policy at KFF. “Pharma sees this as the camel’s nose under the tent, and it probably is.”

Policy experts said the industry would try to mitigate the effects of the bill as much as possible.

“They will litigate this through the courts. And they will try and change the legislation in the future,” said Mark Miller, a former government health policy official who is now executive vice president of healthcare at Arnold Ventures.

It remains to be seen how much this bill will scare investors, who many consider pharmaceutical stocks safe bets during economic downturns.

“Sentiment for US pharma is at multi-year highs and we do not see IRA drug reform as significantly changing investor positioning,” a JPMorgan analyst note said.

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Reporting by Ahmed Aboulein; Additional reporting by Richard Cowan in Washington and Lewis Krauskopf in New York; Edited by Michael Gershberg, Deepa Babington, and Leslie Adler

Our criteria: Thomson Reuters Trust Principles.

Ahmed Aboulin

Thomson Reuters

Washington-based reporter covering US health and pharmaceutical policy, focusing on agencies such as the Department of Health and Human Services and the Food and Drug Administration, formerly based in Iraq and Egypt.

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