I know I have been a bit lax in posting here but things have been sort of boring in our industry as of late. Which is good and bad but something hit my newsfeed today that piqued my interest. As usual, my commentary is in red.
https://pharmaphorum.com/news/judge-kicks-out-another-medicare-price-negotiation-challenge
Judge kicks out another Medicare price negotiation challenge
A Connecticut federal judge has sided with the US Department of Health and Human Services (HHS) in Boehringer Ingelheim's challenge to Medicare’s drug price negotiation programme, rejecting the company’s position.
Judge Michael Shea denied all of Boehringer's claims that the Medicare negotiation programme, the key policy in President Biden’s flagship Inflation Reduction Act (IRA), is unconstitutional.
I like this, they open with the "red meat", the Constitutional question. This question can be asked all the way up to the very formation of Medicare A and B. Does a government have a right to create products that supersede the private sector and even further do they have a right to create an environment where they own a monopoly on goods and services? We will answer this question as we go along here.
In his order, Judge Shea said that Boehringer’s participation in Medicare is voluntary, albeit with “considerable economic incentive,” adding that the federal government is entitled to place conditions on companies who benefit from its programmes.
No, your honor, it is NOT voluntary. If a pharmaceutical company wants to compete in the over 65 market, they MUST go through CMS/HHS. The only way around that is if they are also in the union/organized labor market or the employer based market. Actuarial science has made competing in the employer based market almost unfair because the rate increases and the table of rates for folks between ages 60-65 is almost criminal. For an employee over 65 to remain on employer based coverage is ridiculous because government has laid out the bait of $0 premium MAPD plans that include at no additional costs, the Part D coverage. Add on to the fact that the employee/Medicare eligible member HAS to purchase a qualifying Part D plan or be subject to a penalty of 1% of the national average per month uncovered. That penalty is for life, it never goes away. So the government corners the market and then taxes you if you don't play. Not very Constitutional if you ask me.
The verdict continues a run of setbacks for the pharma industry in its efforts to fight the programme, coming after defeats in court for Bristol-Myers Squibb and Johnson & Johnson, AstraZeneca, the Pharmaceutical Research and Manufacturers of America (PhRMA) trade organisation, and the US Chamber of Commerce.
Boehringer’s lawsuit has been brought on similar grounds to the others, including that Medicare is violating the due process and takings clauses of the Fifth Amendment – essentially that allowing Medicare to negotiate the prices of their drugs amounted to illegal ‘physical taking’ of their property – as well as the First Amendment right to free speech by making them sign agreements that state the prices being set are fair.
Yes and this is the problem. By having the federal government corner the market AND make up the rules, it is absolutely unfair to private enterprise. By tying everything to Part A and B, it means that the government is supreme and final authority for these programs which isn't the best of ideas. Yes, we all want the best prices possible but government regulations in forcing all of these years of trials ensures that a product coming to market WILL be expensive as the manufacturer tries to recoup some of the money laid out in bringing the product to market. Government has no right to interfere with that as they try to look all benevolent deciding what some companies product is worth.
The suit also claimed that the negotiations violate the Eighth Amendment because they amount to an excise tax designed to force pharma manufacturers to accept the government-mandated price of medicines.
Overall, the assertion is that there is no negotiation, but rather mandatory price-setting by the government that is backed up by punitive fines if companies do not comply. Under the IRA, companies that refuse to reduce prices risk an excise tax starting at 65% of US sales of a product, increasing by 10% every quarter until it reaches a maximum of 95%.
Again, if the manufacturers had another market to compete in, this might fly but the fact that the government is the only game in town and being judge, jury and executioner isn't quite meeting the definition of fair.
Boehringer filed its challenge last August after it became clear that its big-selling diabetes treatment Jardiance (empagliflozin) – sold with Eli Lilly – was being included among the first 10 medicines subject to the first round of Medicare pricing negotiations.
A few weeks later, the company publicly committed to entering the first round of Medicare price talks. After the negotiation period, the new prices will be announced on 1st September 2024 and will go into effect on 1st January 2026 – assuming the pharma industry continues to be unsuccessful in its legal challenges.
The company knew full well that if they wanted to be in the lucrative Over 65 market, they had to play ball. One can be quite sure they weren't happy but the business climate they are operating in demanded it.
