Courtesy of Search Engine Land
On August 16, 2022, President Joe Biden signed the Inflation Reduction Law Act into law, part of which is meant to help reduce the price of prescription drugs. Under this act, drug companies are now required to lower their prices to make it more affordable for Americans. If the companies do not abide by this law, they will be given heavy fines. In response to this, the Pharmaceutical Research and Manufacturers of America filed a lawsuit to counter these new requirements. PhRMA argued that “the penalties violated the Constitution’s Eighth Amendment protection against excessive fines.” However, it has been found that 36% of Americans have difficulty paying for their prescriptions, so the constitutionality of PhRMA’s lawsuit could have widespread and long-lasting consequences for the American people.
According to the Centers for Disease Control and Prevention (CDC), “out-of-pocket costs on retail drugs rose 4.8% to $63 billion in 2021” and “in 2021, 8.2% of adults aged 18-64 who took prescription medication in the past 12 months reported not taking medication as prescribed due to cost.” This includes people recovering from surgeries or who have life-threatening conditions. To save money, they are not taking medications despite the fact that it could cost them their life. High healthcare costs also play an important role in this problem, as healthcare is supposed to help lower the cost of prescription drugs, but healthcare can cost up to $13,493 per person.
A poll conducted by Protect Our Care, a nonprofit organization dedicated to lowering healthcare costs, found that around 80% of Americans supported allowing Medicare to negotiate the prices of drugs; when asked whether or not the new act would help their families, 52% answered yes. However, another poll conducted found that 24% of voters “have heard a little” and 33% have heard “nothing at all.” This reveals that while this act is not that well–known, it is highly supported by those who are aware of it.
Although Part B of Medicare is the plan that will be primarily affected, Part D will also be impacted. Part D will now have insulin available at $35 and will allow seniors and others in need of it to save upwards of $500, revealing just how expensive insulin and other prescriptions are in the United States. Part B will be changed in two main ways. The first way it will change is that there will now be Medicare Drug Price Negotiation, meaning there will be 10 different prescription drugs that Medicare is responsible for negotiating the price of so that it is more affordable for the average American. The ten drugs are Eliquis, Jardiance, Xarelto, Januvia, Farxiga, Entresto, Enbrel, Imbruvica, Stelara, Fiasp (and multiple variations of Fiasp). However, the new negotiated price will only go into effect beginning in 2026. The second change will require “drug companies [to] raise the prices of certain drugs covered under Part B and Part D faster than the rate of inflation to pay Medicare a rebate.” Every drug company that hikes the prices for prescription drugs will be required to pay Medicare programs back for the money spent so that Medicare can make it affordable for the clients.
PhRMA is against this new act and has stated that it “has real consequences” for the American people. PhRMA believes that the new act will actively discourage companies and drug developers from continuing their research and that the government is selecting people to be winners and others to be losers. PhRMA and its co-pharmaceutical companies would be required to pay taxes set by Medicare, starting at 65% and increasing by 10% every quarter with a maximum of 95%.
According to the Office of the Assistant Secretary for Planning and Evaluation (ASPE), it is estimated that this act is helping “2.1 million Asians, 5.8 million Blacks, and 5.3 million Latinos”. However, the final numbers are in the process of being revised to be more accurate. The United States Department of Health and Human Services has an interactive map that allows users to click on a state to find out how the law affects them. According to the map, it is estimated that people with Part D plans in Massachusetts will save a total of $79 million. States with a higher percentage of people enrolled in Part D are estimated to save more; Florida is expected to save more than $285 million with 1,200,000 people enrolled, whereas states with fewer people enrolled will save less. Alaska is estimated to save around $4 billion with only 1000+ people enrolled. There is yet to be information as to how much people with Part B will save.
The decreased costs of pharmaceuticals mean more Americans will be able to afford their required prescriptions, but it comes at the expense of PhRMA.