How Big Pharma is Misleading You

Big drug companies want to maintain their chokehold on Medicare’s budget, claiming that the Department of Health and Human Services lacks the authority to negotiate the conditions of the program.

The Facts: There is a long-standing precedent for this program. The Department of Veterans Affairs (VA) has been able to negotiate prescription drug prices since 1992, paying around 54 percent less for drugs than Medicare, and Congress has already delegated broad authority to Medicare without judicial review in at least 25 instances.

Big drug companies claim that they have a constitutional right to price gauge as much as they want for drugs that have been on the market for decades without competition – and Medicare is required to foot the bill.

The Facts:  Drug companies want to continue the status quo of having their greed unchecked by unilaterally setting prices Medicare is required to pay. For too long, the industry has been able to exert unprecedented power and deprive Americans of a fair market price for drugs. Medicare is NOT constitutionally required to pay whatever prices drug companies set – the only reason they did not have to negotiate sooner is that Republicans have been giving concessions to the powerful drug industry, barring Medicare from negotiating drug prices in a 2003 bill amending Medicare.

Drug manufacturers and their allies have fought hard against the idea that they should be subject to any pricing regulations set by the government.

The Facts: Drug companies – and businesses in general – are not constitutionally shielded from lawful price regulations. Doctors who choose to participate in Medicare are paid according to a pricing schedule determined by the government, for example.

Instead of demonstrating their willingness to participate as equal parties in a fair negotiation process, greedy drug companies want to paint themselves as victims of a so-called price-setting scheme.

The Facts: Big drug companies are private entities with enormous market power because they are the sole manufacturers of drugs that millions of Americans depend on. The negotiation program is merely a pathway for Medicare to negotiate – rather than blindly accept – prices paid for a limited number of specified drugs through a regulated, market-driven process. The Inflation Reduction Act does not impose price controls or set the market rate for drug prices.

Big drug companies are so desperate to protect profits that they distort constitutional rights, falsely claiming that the government cannot require participating companies to sign agreements to negotiate maximum fair prices for products sold through Medicare.

The Facts: The drug companies subject to negotiation are already contracted with Medicare and have always been required to follow rules and regulations set by the program. Medicare’s authority to attach certain conditions and language to its own funding and programs has been upheld by both state and federal courts, and the Supreme Court has previously explained that these conditions do not violate the First Amendment – even if private actors disagree with those conditions and language.

Big drug companies want consumers to believe that participation in Medicare is a mandatory part of conducting business in their industry and that the drug negotiation program leaves them with no other options.

The Facts: The Inflation Reduction Act lets companies decide whether or not they wish to participate and leaves companies to decide which path makes the most economic sense for them. The drug negotiation program does not force drug companies to enter into agreements against their will; participation in Medicare is completely voluntary, and big drug companies do not have a constitutional right to dictate the prices they pay without a fair market negotiation.

Even though they signed contracts with Medicare, big drug companies making record profits are saying they should not have to pay fees for refusing to provide the necessary information and documents required to facilitate the negotiation process.

The Facts: Drug companies can avoid fines by simply complying with the negotiation process or exiting the Medicare and Medicaid programs when contracts expire. These fines are also not unprecedented – several provisions in the Tax Code impose similar large excise tax assessments, some even more than 100% of the amount involved.