Drugmakers are up in arms over a new program allowing Medicare to negotiate prices on some drugs. The real scandal, of course, is the absurd prices the companies set for these drugs’ sale in the United States, when they are sold for so much less elsewhere.
Xarelto, pictured here, is one of the prescription drugs that will be subject to Medicare price negotiations under the Inflation Reduction Act. (Scott Olson / Getty Images)
In response to this week’s launch of a new program letting Medicare negotiate lower prices for a handful of medicines, drugmakers are insisting that the initiative will limit patients’ access to medicine and stifle the development of new cures.
However, all ten of the drugs up for negotiation are already being sold in other countries at fractions of what pharmaceutical companies are charging for them in the United States, according to our review — and drugmakers are reporting huge revenues from those foreign sales.
In some cases, Americans — whose tax money subsidizes the development of virtually all medicines approved for sale in the United States — are being charged 1,000 percent more than foreign patients for the same drugs.
Drugmakers have filed multiple lawsuits to try to block the new Medicare negotiation program, claiming that price reductions will harm American patients. However, some of those same companies recently raked in upward of $4 billion in revenue last quarter selling six of the targeted pharmaceutical products in foreign countries at lower world-market prices. That’s more than $47 million per day — or $2 million an hour.
That cash haul — disclosed in drugmakers’ earnings reports — suggests that pharmaceutical companies will still be able to reap enormous windfalls, even if Americans can finally access prices closer to those charged on the global market for some drugs.
For two decades, the US government barred Medicare from negotiating drug prices. At the same time, drug companies have gamed the patent system to prevent competitors from selling lower-cost generic versions of their products. Meanwhile, for decades drugmakers’ congressional allies blocked legislation designed to help pharmacists and wholesalers import medicines at lower world-market prices and sell them at discounted rates in the United States.
The end result: Americans pay the highest prices per capita among residents of wealthy countries for prescription drugs — even though the American public subsidizes research and development (R&D) costs on essentially every drug approved for sale in the United States.
Put simply, higher drug costs kill people.
“Tantamount to Extortion”
Since at least 2006, Democratic politicians have campaigned on the idea of allowing Medicare, the national health insurance program for seniors and those with disabilities, to join the rest of the world in negotiating drug prices to lower health care costs for both patients and the government.
President Joe Biden pledged during his 2020 campaign to “repeal the existing law explicitly barring Medicare from negotiating lower prices with drug corporations.”
Last year, Democrats finally passed a drug price negotiation provision, but the measure was much more limited than lawmakers originally proposed, thanks to aggressive industry lobbying and successful efforts by pharma-friendly lawmakers to water it down.
The law will allow Medicare to begin negotiating prices, effective starting in 2026, on a select handful of expensive drugs that have no generic competition and have been on the market for at least nine years.
As the biopharmaceutical industry news site Endpoints News points out, four of the ten drugs on the Biden administration’s target list may not even have their prices negotiated in the end, thanks to “incoming generic or biosimilar competition.”
The pharmaceutical industry has nonetheless raged against the limited drug negotiation plan with a series of lawsuits and hysterical comments, out of fear that the Inflation Reduction Act’s drug pricing provisions could open the door for more aggressive crackdowns in the future.
“Politics should not dictate which treatments and cures are worth developing and who should get access to them,” Washington’s top drug lobby Pharmaceutical Research and Manufacturers of America (PhRMA) said Tuesday, complaining that the Biden administration is “giving a single government agency power to arbitrarily set medicine prices with little accountability, oversight or input from patients [and] their doctors.”
The drugmaker Merck, based in New Jersey, sued the Biden administration in June, arguing that the Inflation Reduction Act’s drug price negotiation program is “tantamount to extortion” and unconstitutional. Merck’s action has been followed up by lawsuits from PhRMA itself, as well as from drugmakers Astellas, AstraZeneca, Boehringer Ingelheim, Bristol Myers Squibb, and Johnson & Johnson.
A Tale of Two Prices
The companies making the ten drugs on the Biden administration’s target list have been selling the products for far less elsewhere, according to our review of government studies, think-tank reports, and international pharmacy websites.
Take Januvia, a once-daily pill from Merck that helps lower blood sugar levels in adults with type 2 diabetes. A 2019 report from House Democrats found that Januvia was priced at $15.70 per dose in the United States, or roughly 1,020 percent higher than in international markets, where it cost just $1.40 on average.
NovoLog, an insulin made by Novo Nordisk, is priced at $37.30 per dose in the United States, or 440 percent more than the $6.90 that it costs in other countries, according to the report. Stelara, an injection from Janssen used to treat Crohn’s disease and severe plaque psoriasis, costs $16,600 per dose in the United States, or 360 percent more than the $3,585 that it’s priced at elsewhere.
Another drug on the list, Xarelto from Johnson & Johnson, prevents blood clotting to reduce the risk of stroke. Xarelto’s domestic gross retail price was $15.70 per pill, according to a 2021 report by the US Government Accountability Office. That’s 575 percent higher than the $2.30 it is sold for on average in Australia, Canada, and France.
Entresto, a drug from Novartis used to treat heart failure, retails in the United States for $9.20 per pill, or 230 percent higher than the $2.82 it’s sold for in Australia, Canada, and France, per the report. AbbVie’s Imbruvica, used to treat blood cancers, retails for $158 per pill in the United States, more than double what it costs in those countries.
Eliquis, from Bristol Myers Squibb, is used to prevent blood clotting and reduce the risk of stroke. According to a report last year from the nonprofit Health Care Cost Institute, Eliquis has been sold in the United States at a median cost of $7.30 per pill, which is 267 percent higher than the $2 it’s been sold for in Germany, Spain, and Switzerland.
Publicly Funded Profits
The United States spends $45 billion annually on the National Institutes of Health (NIH), which in turn goes to fund new drug research. Every drug that the US Food and Drug Administration (FDA) approved for sale between 2010 and 2019 benefited from research funded by the NIH, according to a 2020 study from the Institute for New Economic Thinking.
Because the United States so heavily subsidizes R&D, reducing profits on top drugs by 15 to 25 percent would have a negligible effect on the number of new drugs introduced over the next decade, according to a 2021 study from the federal, nonpartisan Congressional Budget Office.
While the pharmaceutical industry claims that negotiating drug prices could reduce companies’ incentive to spend on research and development, a study last year found that, between 2012 and 2021, the largest publicly traded pharmaceutical companies spent more on stock buybacks and dividends to reward shareholders than they spent on research and development.
Among the drugs on the Biden administration’s negotiation list are two used to treat type 2 diabetes: Jardiance, from Boehringer Ingelheim; and Farxiga, from AstraZeneca.
A 2016 research update from the NIH’s National Institute of Diabetes and Digestive and Kidney Diseases found that the institutes had “supported many stages” of the research that led to the creation of both Jardiance and Farxiga.
According to PharmacyChecker.com, the cheapest discounted price for Jardiance in the United States is $19.04 per tablet, which is 1065 percent higher than the $1.63 it’s sold for on average at online international pharmacies.
The lowest discounted US price for Farxiga is $18.14 per tablet, according to the same website. That’s nearly 970 percent higher than the $1.70 it’s sold for on average via online international pharmacies.
The US government also liberally grants patent exclusivity to drugmakers, an arrangement that allows companies to maximize profits. The government has furthermore permitted companies to employ dubious strategies to artificially maintain monopolies on lucrative drugs for years after their exclusivity should have expired.
A 2022 report from I-MAK, an advocacy group that works on drug patent issues, found that pharmaceutical companies file on average 140 patents per drug, with an average of 66 percent of those patents filed after the FDA had granted approval.
Enbrel, made by Amgen, treats symptoms of rheumatoid arthritis. Enbrel is sold in the United States in packages of four single-dose injections at a median cost of $5,087, according to the Health Care Cost Institute report. That cost is 373 percent higher than the $1,076 that patients pay on average in Germany, Spain, and Switzerland.
In 2016, the FDA approved a biosimilar to Enbrel, which is essentially a lower-cost reprise of a drug, as opposed to a generic discount alternative. However, due to a 2021 court decision in New Jersey, where the pharmaceutical industry is a major employer, the biosimilar competitor was blocked from coming to market until 2029.
On Wednesday, Endpoints News reported that Enbrel may not end up being part of the 2026 price negotiations, due to incoming competition.
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