The Reality of the Democratic Drug Price 'Victory'

By Thomas Neuburger

Seems, madam! Nay, it is; I know not “seems.”

—Shakespeare, Hamlet

If you’re anywhere near a news machine at all, you’ve heard about the Democrats' IRA (“Inflation Reduction Act”) bill, and with respect to drug pricing, you’ve probably seen headlines like these…

Thanks to the Inflation Reduction Act, Medicare is on track to negotiate drug prices (MarketWatch)

Senate OKs sweeping bill lowering drug prices and promoting clean energy, setting up major Biden win (USA Today)

...offset by headlines like these…

Schumer Lets Aide Kill Key Drug Price Reforms: The decision comes as Schumer is now the Senate’s #2 recipient of pharmaceutical industry campaign cash (David Sirota / Lever News)

Democratic drug pricing bill removes insulin cost cap (The Hill)

The drug-price provisions of Biden’s shiny IRA bill are being touted from many corners, and in truth, one provision does represent a crack in the wall of drug-price obstruction. But that crack is so small that no one in the industry will shed private tears over its appearance — though for-show public tears are bound to flow, the better to fool you with.

To put it bluntly, the drug-price victory that Democrats are celebrating is far less than it seems. Here's a handy summary from The Hill of the contents of the bill. This is about its health care provisions:

Medicare can negotiate lower prices.

The bill would allow Medicare to negotiate prices for some drugs for the first time, a policy Democrats have been trying to enact for years over the fierce objections of the pharmaceutical industry. The provisions save more than $200 billion over 10 years.

• It would allow Medicare to negotiate lower prices for 10 high-cost drugs beginning in 2026, ramping up to 20 drugs by 2029. There is a steep penalty if a drug company doesn’t come to the table: a tax of up to 95 percent of the sales of the drug. There is also a ceiling that the negotiated price cannot rise above.

• In a deal with moderates including Sen. Kyrsten Sinema (D-Ariz.), only older drugs are subject to negotiation after a period of nine years for most drugs and 13 years for more complex “biologic” drugs. That means the negotiations are more limited than many Democrats wanted.

So Medicare can negotiate lower prices:

• But for 10 drugs only … starting four years from now

• Followed by 10 more drugs only … starting three years after that

Meanwhile, more than 20,000 prescription drugs are marketed and sold in the U.S. At the rate of 10 new drugs covered every three or four years, let’s see … carry the four … you’ll be dead before less than 1% of them are price-controlled. Call that a win for the industry.

Add to that the sweet deal Sen. Sinema cut for her clients (sorry, friends in rich places), sweet because “older drugs” (like insulin) and “biologics” (like Humira and Eliquis) are where the real money is.

Humira, an arthritis medication, can be had “with coupon” for as little as $6,300 per carton of two pens, down from $9,200 retail.

Eliquis, a blood clot and stroke preventative, can be had for as little as $510 for 60 tablets. As a maintenance drug, that’s about 10 days’ worth.

None of those prices will be coming down ever under this agreement, if “ever” means after most of those who need the relief are dead.

The climate provisions of the IRA bill are another discussion. Democrats are claiming “40% reduction” in greenhouse gases by 2030, a claim I find incredible, on the simple evidence that our friends at Big Oil will never take that big a haircut, ever. You’ll get cheap insulin before they take that big a loss. But more on that problem later.

In the meantime, yes, applaud the passage of the IRA bill. But no, don’t do a victory dance yet — the splinters and tacks on the floor may damage your feet.