Skip to main content

FACT SHEET: Big Drug Companies Have Been Ripping Us Off For Years And Now Are Trying To Protect Their Profits With Scare Tactics, Lobbyists, And Lies

By February 22, 2023No Comments

Big drug companies have been ripping us off for years and are now trying to protect their profits with scare tactics and lies. Big drug companies spent over $100 million trying to kill the Inflation Reduction Act, and now they are spending even more to undercut the new law. Their efforts would: (1) increase drug costs and Medicare premiums for seniors by thousands of dollars a year, (2) increase the deficit, and (3) increase drug companies’ profits at the the expense of seniors’ health and financial well-being. 

The Biden-Harris Administration and Congressional Democrats succeeded in enacting legislation that saves lives, lowers prescription drug costs for seniors, and puts thousands of dollars per year back into the pockets of Americans — the greatest health care achievement since the passage of the Affordable Care Act. 

The Inflation Reduction Act:

  1. Caps seniors’ monthly insulin costs at $35 per month.
  2. Provides free recommended vaccinations to seniors.
  3. Caps seniors’ out-of-pocket drug costs at $2,000 per year starting in 2025. 
  4. Prevents price gouging by requiring drug companies to pay rebates to Medicare if they increase their prices faster than inflation.
  5. Gives Medicare the power to negotiate lower drug prices for millions of Americans. 
  6. Reduces the deficit by billions of dollars.

The drug industry is already spending heavily on lobbying to gut the law. Their main focus is undermining negotiations. They want to postpone negotiations for years over the price of some of the most expensive drugs. Currently, small molecule drugs (generally, retail prescription drugs sold in pill form and covered under Part D) are eligible for price negotiation once they have been on the market for 9 years; the drug industry wants to lengthen that period to 13 years to be consistent with biologic drugs, which are more complex to manufacture and are the biggest driver of rising drug spending. 

  • If big drug companies and policymakers desire an even playing field among all drug types, all excessively priced drugs, including biologics, should be aligned with the 9 year negotiation eligibility rule currently in place for traditional small molecule drugs.

If big drug companies get their way, drug costs and premiums will increase for seniors and people with disabilities covered by Medicare. Delaying the eligibility period for Medicare negotiation would reduce the number of drugs eligible for negotiation and prevent some of the highest prices from being lowered. For example, Bristol-Myers Squibb’s atrial fibrillation drug, Eliquis, would not be eligible for lower drug price applicability in 2026 if the drug industry succeeded in rolling back the Inflation Reduction Act. More than 2.6 million seniors would face higher out-of-pocket costs for the drug for an additional four years. Watering down the new law would also lead to higher Medicare premiums.

Seniors reject drug companies’ argument that negotiation threatens innovation. AARP’s 2023 survey of their 38 million members re-affirms that Republican and Democratic voters reject the drug industry’s argument that lower prices will kill innovation. 

  • Only 23% think it will have a negative impact on innovation. 
  • 72% believe high drug prices are a result of price gouging by the drug industry.

The drug industry claims that Medicare negotiation will hurt innovation are false. CBO estimates that over the next 30 years, FDA will approve about 1,285 drugs, about 15 fewer drugs than would come to market without the negotiation program. Furthermore, experts agree that the U.S. market will always be the most generous payer and, thus, will continue to provide huge incentives and rewards for true innovation.

The Medicare Drug Price Negotiation Program is designed to reward innovation. The new law gives drug companies at least nine years to recoup their research and development investments and earn profits before becoming eligible for Medicare negotiation. Recent research shows that cancer drugs recover their research and development costs within five years, allowing ample time for drug makers to earn high returns on valuable therapies. Moreover, the argument that drug makers need to set prices high to cover research and development costs is not supported by the evidence  – research shows no correlation between a drug’s price and its research and development costs. For decades, big drug companies have made massive profits by introducing “me too” drugs that don’t provide significant new clinical benefits. Over 60% of the drugs listed on the World Health Organization’s list of essential medicines are me-too drugs. Congress designed the Medicare Drug Price Negotiation program to reward and incentivize true innovation by requiring CMS to consider “unmet medical needs” and a drug’s comparative effectiveness and benefits over other similar drugs, encouraging drug manufacturers to invest bringing truly innovative therapies to market. 

Without Medicare savings from negotiation, Congress couldn’t afford the cost of the bill’s other drug benefits. The Medicare Drug Price Negotiation and Prescription Drug Inflation Rebate Programs reduce some of drug companies’ outrageous profits, and use those savings to deliver better benefits to seniors like lower premiums, a $2,000 out-of-pocket cap, a $35 cap on insulin costs, and free recommended vaccines. Weakening negotiation would undermine these benefits and add to the deficit.