Merck’s Price Increases Spark Big Pharma Accountability Debate

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TL/DR –

In January 2024, pharmaceutical company Merck raised the prices of 21 prescription products, with most increases surpassing the rate of inflation. This has sparked a debate on accountability in the pharmaceutical industry, leading to legislation such as the Inflation Reduction Act (IRA), which aims to cap drug prices and introduce greater affordability measures. However, these changes have been met with opposition from big pharmaceutical companies who argue against government control over pricing, leading to legal disputes and further discussions on the future of prescription drug pricing.


Merck’s Prescription Price Increases Spark Big Pharma Accountability Discussion

In January 2024, Merck, a significant pharmaceutical industry player, increased the prices of 21 of their drugs. Notably, 20 of these price hikes surpassed the inflation rate, sparking debates on Big Pharma’s role in drug pricing. Generally, the pharmaceutical industry announced significant brand name medicine price increases with a median spike of 4.5%, well above the inflation rate. Interestingly, in 2023, the average brand name drug net prices dropped by 3%.

Impact of The Inflation Reduction Act (IRA) on Drug Prices

The IRA introduces a $2,000 cap on out-of-pocket drug expenses for Medicare Part D plans starting in 2025, aiming to make sought-after medicines more affordable. However, prominent Pharma companies like Merck, BMS, J&J, Astellas, Boehringer Ingelheim, and AstraZeneca oppose the bill, evidenced by their legal complaints against the IRA legislation.

Prescription Drug Price Negotiations with CMS and What it Means for the Future

The Centers for Medicare and Medicaid Services (CMS) are set to finalize their negotiations on new prescription drug prices on Aug 1, 2024. If an agreement is reached, the new prices will be implemented in Medicare by 2026. Under the new regulations, drugmakers must provide a rebate if they increase prices quicker than inflation.

Consequences of Medicare Drug Pricing Reform

The Medicare drug pricing reform, a noteworthy pharmaceutical industry development, has substantially reduced patient costs. Key changes include an out-of-pocket expense cap and government control over pharmaceutical company charges. The IRA is central to these changes, reflecting President Joe Biden’s fight against high drug prices with measures for immediate relief to Medicare patients and drug price controls.

IRA Controversy & Big Pharma’s Response

The IRA’s most contentious provision allows Medicare to negotiate prices for specific costly drugs. The impact of this power on privately-insured Americans’ drug prices is still uncertain. Pharmaceutical companies, in response, have launched lawsuits to overturn the negotiations. However, government savings from the IRA’s drug pricing elements are projected to be $237 billion over a decade.

Supplemental Measures to Control Drug Prices

Additionally, the Biden administration and bipartisan legislation are pushing for further drug price control. Initiatives include bills for greater transparency and less advantageous conduct by pharmacy benefit managers, investigations into leading PBMs and drug company patenting practices that delay cheaper drug market introduction, and a framework for seizing unreasonably priced drugs resulting from research funded by the National Institutes of Health.


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