House Dems Take Legal Action to Expand Scope of IRA Battle

In response to the looming threat of price-negotiating by the federal government, major biopharmaceutical companies have begun to abandon costly drug programs. This has provoked outcry from industry powerhouses, including PhRMA, the US Chamber of Commerce and several state chambers of commerce, who have united in an effort to sue the Biden administration over the Inflation Reduction Act (IRA). However, the future of drug prices remains uncertain as the battle wages on.

House Democrats have just unveiled bold legislation that goes beyond existing efforts to lower drug prices by expanding the scope of drug price negotiations to include those with private health insurance. The legislation would increase the number of drugs in the program from 20 to 50 annually, potentially yielding unprecedented cost savings for consumers.

Expanding the price negotiations beyond the 64 million people currently enrolled in Medicare to include the entire U.S. population would be groundbreaking. This would encompass 164 million Americans and their families covered under private health insurance, as well as the 16 million on Marketplace coverage — almost everyone in the country! This monumental step would ensure better prescription drug prices for the entire nation.

Congress is taking action to make life-saving medications more accessible and affordable for Americans with the introduction of the Reducing the Price of Prescription Drugs Act. According to Ways and Means Committee Ranking Member Richard E. Neal, D-MA, this important legislation will put an end to the troubling trend of forgoing critical treatments due to unaffordable costs.

The biopharma industry is voicing its strong disagreement with the proposed legislation, with Sarah Ryan, a PhRMA spokesperson, stating that “it’s troubling that some policymakers prefer scoring political points over driving real, bipartisan reforms that would help patients.”

She goes on to explain that this proposal puts us at risk of giving the government full control over our healthcare system, which could ultimately lead to restricted access and fewer cures and treatments. It’s a step in the wrong direction for Americans, she concludes.

The Legal Road Ahead

The biopharma industry has launched a legal fight against the new price negotiation program, spurred by a violation of the Fifth Amendment. The Fifth Amendment stipulates that private property cannot be taken for public use without just compensation, and industry leaders feel that this legislation disregards this right.

The group faces an uphill battle in persuading the courts that their arguments are sound, according to Robin Feldman, professor of healthcare law at University of California College of the Law-San Francisco. However, it remains to be seen whether the group is up to the challenge of convincing the courts with their words.

The state government can be seen as a purchaser on behalf of Medicare, with the right to dictate pricing and terms on important products like prescription drugs. Companies are free to choose not to participate in Medicare if they wish, which will avoid any potential penalties. This way, companies can exercise their autonomy over their pricing and terms while empowering the state to make affordable decisions on behalf of those enrolled in Medicare.

The case is most likely headed to the Supreme Court, according to legal expert Feldman. She pointed to historical, textual and other precedents to make her argument that patents are not private property for the purposes of the Fifth Amendment’s Compensation Clause. Her conclusion adds to the ongoing debate concerning patent rights in the United States, which will undoubtedly be resolved by the highest of courts.

The Founders had an immense appreciation for property such as land, which stands in stark contrast to the limited purpose that patents are granted with – for the public benefit. This disparity is clearly reflected in the Patent Clause of the Constitution, which fails to make sense in the context of patents.

The Supreme Court knows that patents are more than just a benefit to inventors; they serve the greater good of society. Patents represent public rights, not just the private rights protected by the Constitution, thus we grant them to incentivize innovators and spark progress.

Attorney Samuel Feldman cannot make a judgment on what legal challenges the new legislation might endure due to the possibility that the ultimate language used could determine its constitutionality.

Potential Industry Fallout

The far-reaching implications of the new bill have the potential to bring about a significant shift in R&D decisions for biopharma companies. For instance, Europe-based Novartis may not be able to escape the impact of the new IRA legislation as it initially believed. This bill may turn out to be a game-changer in terms of the company’s future direction.

Michael Meo, Director of US External Engagement at Novartis, expressed his disappointment at certain congressional members’ new policies which could further damage patients. He noted the detrimental effects of price controls on the research and development of important new medicines.

Novartis has chosen to walk away from some early-stage projects due to the Initial Research Assessment (IRA), according to Meo, though he kept the details under wraps.

Novartis CEO Vas Narasimhan revealed on the company’s Q2 earnings call that they are closely examining the potential consequences of an impending Medicare Rebates Act on their business. With renal products largely excluding Medicare recipients, Vas expressed confidence that Novartis would not suffer any losses from the new legislation’s encompassing of younger patient populations. Taking definitive measures to avoid any undesired impacts, the pharmaceutical giant has placed itself in a strategic position to protect profit margins.

Meo urges Congress to address the potential harms of the IRA, rather than expanding a policy too detrimental for patients and future innovation. He calls upon members of Congress to confront these detrimental, yet unintended, consequences head-on.

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