The economic impact of pharma giants’ fight with the U.S. government over drug pricing reform

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Big Pharma firms Merck and Bristol Myers Squibb are challenging President Biden’s Inflation Reduction Act, alleging the law’s plan to lower drug prices infringes on their rights. The U.S. Chamber of Commerce — whose members include drugmakers AbbVie and Eli Lilly — is also aiming to block Medicare from rolling out the program.

In 2022, President Biden signed the Inflation Reduction Act (IRA) into law to fund major healthcare and climate change initiatives. No Republican supported the bill. The IRA allows Medicare to negotiate the prices of certain high-cost drugs. The program would first focus on 10 drugs in 2026. From there, it is slated to expand to 15 drugs in 2027 and 2028, and 20 drugs per year from 2029 on. Only medications on the market for years without competition are eligible.

Assessing the impact of the Inflation Reduction Act on drug …
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A timeline of Merck’s legal battle over Medicare negotiation

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Marking the first legal challenge of its kind, pharma giant Merck & Co. took to the courts on Tuesday, directly contesting the U.S. government over the Medicare drug price negotiation program. The Big Pharma company’s lawsuit, filed in the U.S. District Court for the District of Columbia, contends the program’s basis — the Inflation Reduction Act (IRA) — infringes upon the Fifth and First Amendments of the U.S. Constitution.

The legislation has put pricing pressure on the industry and contributed to a wave of recent M&A deals.

Merck, and the wider pharmaceutical industry, are raising the alarm. They claim the law, in effect, coerces drugmakers into accepting below-market rates. The lobbying group PhRMA (Merck is a member) released a statement in April 2023 arguing that the Inflation Reduction Act threatens patient access and complicates R&D efforts.…

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Unclear path for drug-pricing reform after Dem sweep 

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With Democrats having gained control of the Senate and the presidency, some form of drug-pricing reform is likely. But with the raging COVID-19 pandemic and ongoing threats to the Affordable Care Act, Democrats are more likely to focus on those issues in the near term, according to Barrett Thornhill, a partner at the public affairs firm Forbes Tate in a call with UBS analysts.

The political dynamics of the House is one challenge. Even though Democrats have narrow control of the House, they also have an increasingly vocal progressive wing. For that reason, bipartisan healthcare policy from the Senate could “actually have some trouble when it goes to the House because it’s not left enough,” Thornhill said.

COVID-19 itself has stymied prior legislative attempts at drug-pricing reform, while President Trump’s executive orders face ongoing legal challenges.


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