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The Supreme Court has rejected appeals from six pharmaceutical companies, including AstraZeneca and Johnson & Johnson, that sought to block Medicare’s drug price negotiation program, part of the 2022 Inflation Reduction Act. The pharmaceutical industry claims the program amounts to government price setting, discouraging investment in new medicines, and cites a 70% fall in small-molecule drug investment since the program’s enactment. However, the program is expected to reduce Medicare spending by $18 billion and save seniors $1.5 billion in out-of-pocket costs due to lower negotiated prices, with Medicare spending forecasted to hit $438 billion in 2022, up 7%.
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Supreme Court Upholds Medicare’s Drug Price Negotiation Program
In a significant win for the federal drug price negotiation program, the Supreme Court has turned down appeals by six major pharmaceutical companies. AstraZeneca, Bristol Myers Squibb, Boehringer Ingelheim, Johnson & Johnson, Novo Nordisk, and Novartis had sought to challenge Medicare’s prescription drug pricing scheme, part of the 2022 Inflation Reduction Act. The court quashed their appeals without providing any explanation.
Implications of the Court’s Decision
The court’s ruling is expected to solidify the government’s efforts in negotiating drug prices, which has been a subject of multiple legal challenges from the pharmaceutical industry. The industry claims the policy is tantamount to government price setting, which discourages investment in the development of new drugs.
As part of their argument, PhRMA, an industry trade group, unveiled data showing a 70% reduction in investment in small-molecule drugs since the start of the program. To give some background, under the Inflation Reduction Act, these drugs are subject to price negotiations with Medicare nine years after their introduction, while more complex biologic drugs have a 13-year buffer.
The Impact on Pharmaceutical Revenues and Savings for Medicare and Seniors
While the pharma industry has been hit with decreased revenues due to the program, it has resulted in substantial savings for Medicare and its beneficiaries. The program’s introduction of lower negotiated prices for the initial 10 brand-name drugs this year is projected to decrease Medicare spending by $6 billion. In addition, it will save seniors an estimated $1.5 billion in out-of-pocket expenses, according to CMS.
The newest batch of 15 negotiated drug prices, which will become effective in 2027, is slated to further reduce Medicare spending by $12 billion, CMS reported last November. Consequently, Medicare expenditure is slated to rise to $438 billion this year, marking a 7% increase.
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