Vice President, Patents and Innovation Policy, Global Innovation Policy Center (GIPC), U.S. Chamber of Commerce
Vice President, Health Policy, U.S. Chamber of Commerce
July 12, 2023
UPDATE: On July 12, 2023, the Chamber filed a motion for a preliminary injunction, seeking timely relief before the government can further implement its illegal and arbitrary price control scheme. If allowed to go into effect, the scheme would harm not only U.S. businesses, but also U.S. patients—limiting access to medicine, deterring needed investment, and stifling innovation.
Background: Government price controls harm patients, limit access to medicine, and stifle American innovation. Moreover, the new provisions in the Inflation Reduction Act (IRA) violate fundamental protections for free enterprise enshrined in our Constitution, which would have far-reaching implications in the future. That’s why we’re suing the Department of Health and Human Services (HHS) and the Centers for Medicare and Medicaid Services (CMS) over the new price control measures.
Read the full complaint here.
Fill me in: New provisions in the IRA require the federal government to establish a deceptively named “negotiation” process to impose prices for certain drugs covered under Medicare Part B and Part D, enforced by an extremely onerous “tax” that would then apply to any sales of the drug to any purchaser.
As further explained below, the price-setting regime set forth in the statute is not a true negotiation process; it is a price-control scheme. Worse, it is a price-control scheme that is marred by core legal defects and a lack of basic safeguards, and it will have devastating consequences for patients who are depending on new life-saving drugs.
Some drugs won’t be developed and brought to market: As they have in Europe and elsewhere, price controls will force drug companies to shelve promising new medical treatments. A recent study shows that price controls may put the development of more than 400 new medicines at risk.
It’s already happening.
- Alnylam ceased their research and development into a new treatment for a rare eye disease due to the need "to evaluate the impact of the Inflation Reduction Act."
- Novartis and Genentech have warned that the IRA's price controls are already harming investment and research into various cancer treatments due to the chilling effect of the IRA.
Patients will have less access to existing treatments: New research demonstrates that patients in countries that impose price controls have less access to new treatments.
- Before the IRA introduced price controls, the United States had access to 80% of the 104 new oncology products released globally, compared to Europe's 58%.
- Meanwhile, in other developed countries with price controls in place, patients faced long wait times to access new treatments. For instance, in Germany, patients waited an average of 133 days, while in Spain, some had to wait up to 500 days.
There is no real “negotiation” here: Despite Congress’s use of the word “negotiation,” the price-setting regime established by the statute is not a voluntary one. The price imposed by the government at the end of the “negotiation” cannot be declined by the manufacturer. The only way to escape the price is to leave the Medicare program altogether, but that cannot be accomplished in time to avoid the government-set price on some sales or the excise tax penalty on others. This would be devastating for patients in Medicare and would impose crushing financial consequences on manufacturers, further inhibiting their ability to develop and deliver treatments to the market.
- Further, the statute provides no legal recourse for drug manufacturers. Many of the key determinations made under the statute are expressly exempted from judicial review. For this and other reasons, the statute is set up to generate arbitrary price-control decisions that are illegal and harmful to patients and cannot be questioned by businesses. Any U.S. business subjected to such a price-setting scheme would find it impossible to make wise investment decisions. And as the complaint explains, the statute vests an extreme concentration of unchecked power within a single executive agency, violating the Constitution’s separation of powers – a core component of our legal framework that the U.S. Chamber has defended in court in a wide range of cases and contexts, such as our fights against the Consumer Financial Protection Bureau, the Federal Trade Commission, and the Securities and Exchange Commission.
Future Implications: IRA price controls would have long-term implications for free enterprise and U.S. competitiveness.
If the government can set price controls for essential medicines through a black-box regime without allowing for judicial review, the government can do the same for other essential industries, which would be disastrous for our economy and for individual rights.
Bottom line: When the government caps prices, it caps innovation and endangers access to better treatments—harming patients the most. The new IRA provisions establish an artificial and arbitrary system for devising price caps that will jeopardize medical breakthroughs for individuals with life-threatening and chronic illnesses.