U.S. Senators from Connecticut have said they want to lower prescription drug prices. The same goes for pharmaceutical giants Eli Lilly & Co. and Pfizer, which have significant operations in the state.

But lawmakers and these companies strongly disagree on how to proceed.

The debate has crystallized as members of Congress work out President Joe Biden’s $ 3.5 trillion 10-year spending plan. The final version of this “budget reconciliation” legislation could allow Medicare to directly negotiate the prices of many prescription drugs – a change that could generate billions of dollars in savings.

Many pharmaceutical executives warn that the resulting loss of revenue for their industry could severely hamper research and development, but Democrats such as Senses Richard Blumenthal and Chris Murphy counter that letting Medicare negotiate would lower prices for its elderly beneficiaries without reduce innovation.

“Nothing is more important than reducing the cost of pharmaceutical drug prices to the ordinary American,” Blumenthal said in an interview. “People are devastated by these drug prices. There is no reason why they should be so high.

Drug price debate

Millions of Americans struggle with high costs for prescription drugs. Almost 30 percent of adults said they had not taken their medications as prescribed at some point in the past year due to the cost, according to a 2019 survey conducted by the Kaiser Family Foundation.

“In the most powerful and richest country in the world, people shouldn’t have to skip necessary doses of drugs because they can’t afford it,” Murphy said in a statement. “That’s why the fastest and most efficient thing we can do is give Medicare the power to negotiate the price of prescription drugs directly with drug companies. Allowing the federal government to negotiate lower drug prices will save taxpayers billions and translate into big savings for consumers. It is obvious.

Pharmaceutical executives disagree – among them Eli Lilly CEO and Chairman David Ricks. Indianapolis-headquartered Lilly, the No.118 company on this year’s Fortune 500 list, acquired Stamford-based Loxo Oncology for approximately $ 8 billion in 2019. Loxo employs 60 people in his hometown.

“98% of all the prescriptions we sell are already negotiated (with government and commercial insurers), so it’s a myth that the government doesn’t negotiate for drugs,” Ricks said in an interview. “It’s just partly done by third parties. The problem they claim to solve is not a problem.

Under current law, the federal government is “prohibited from interfering in negotiations between Part D plan sponsors, pharmacies, and manufacturers for the prices of prescription drugs under Medicare Part D. A spokesperson for the Centers for Medicare & Medicaid Services said in an email, responding to a request from Hearst Connecticut Media about Medicare’s trading parameters.

RH 3 – the Elijah E. Cummings cuts drug costs now – demonstrated that many Congressional Democrats intend to lift these restrictions.

The law requires the US Department of Health and Human Services to negotiate maximum prices for “single-source brand-name drugs that lack certain generics and that are either among the 125 drugs that represent the largest national spending or among the 125 drugs that account for the largest expenditure on health insurance.

The prices paid in Australia, Canada, France, Germany, Japan and the UK would serve as a benchmark for negotiating maximum prices. Drugmakers who fail to meet negotiating requirements would face civil and fiscal penalties.

HR 3 was passed in the US House of Representatives in December 2019, but it was not voted on in the Senate. It remains to be seen whether one of its main components will be integrated into the final version of the budget reconciliation bill. The House Energy and Trade Committee voted last month to drop proposal to let Medicare negotiate drug prices on its part of reconciliation legislation, but the House Ways and Means Committee kept it on the table by endorsing almost identical language on drug prices.

Lilly officials estimate that the pharmaceutical industry could lose around $ 700 billion in revenue over the next 10 years if HR 3 or equivalent legislation is implemented. They warn that such a loss could significantly reduce its research and development capabilities, including R&D for Loxo, which has two drugs approved by the Food & Drug Administration for rare genetic mutations linked to a number of cancers.

“If we have a good design of the benefits, new drugs can be bought. Generic drugs are coming and making things cheaper for everyone – and, at the same time, we continue to research for the ‘new Vitrakvi’, which is expensive to develop, “said Ricks, referring to the first drug. from Loxo, who obtained FDA approval in November 2018. “Without the promise of a market, which HR 3 would destroy, no one would try … to find these drugs.”

Pfizer, the No. 77 company on this year’s Fortune list, has taken a similar stance. The Manhattan-based company employs nearly 5,300 people in Connecticut, and its Groton plant has played a key role in the development of its COVID-19 vaccine.

“Pfizer recognizes that we have a responsibility to do our part to reduce drug prices, but we believe it needs to be done in a way that does not undermine innovation, job creation and, most importantly, to the company’s ability to deliver breakthrough healthcare. patient solutions, ”Pfizer said in a statement. “Price controls have been tried and tested in other countries, and they have failed.”

Blumenthal responded that allowing Medicare to negotiate prices would not diminish the R&D capabilities of large pharmaceutical companies because he believes their finances will remain strong. For the first half of 2021, Lilly made a profit of approximately $ 2.75 billion, down 4% from the same period in 2020. In the first half of this year, Pfizer reported a profit of approximately $ 10.4 billion, up 53% from a year ago. .

“They give the impression that you cannot lower the prices of pharmaceutical drugs without sacrificing research and development of new products,” said Blumenthal. “Falling drug costs just mean they’re not making gigantic, gigantic profits. They would make decent and fair profits. But they would still have a lot of income to develop new drugs. “

Some health policy experts have said drug companies are justified in expressing concerns about how the adoption of Medicare drug price negotiation would affect research and development, but that it would be difficult to predict. the exact impact.

“Innovation in the United States is higher, not just because of government protection over the profitability of pharmaceutical companies,” said Resul Cesur, associate professor of health economics at the University of Connecticut. “There may be an effect on innovation, but no one has the causal answers to that. “

Other ways to cut costs?

Lilly officials say Medicare spending on prescription drug coverage is reasonable. The Congressional Budget Office estimates that Part D benefit spending will total $ 111 billion in 2022, accounting for 15 percent of net Medicare spending.

“What the US economy pays for drugs is not a problem,” Ricks said. “What it doesn’t do well is reduce costs for patients at the point of sale.

Instead of the changes outlined in HR 3, Lilly officials said they supported other reforms such as caps on out-of-pocket expenses incurred by patients enrolled in Medicare Part D.

“The insurance system has a huge bias against drugs, and we think it should be eliminated,” Ricks said. “So how do you do this?” You reduce out-of-pocket payments when designing the plan. I think we should start with the delivery of part D, which is the drug delivery for the elderly, because the federal government directly controls it. “

In their statement, Pfizer officials also supported the cap on personal spending for Part D recipients. In addition, they said “we believe the discounts should either be removed or be guaranteed to go directly to patients. and not in the pockets of intermediaries. And we believe patients should have access to cheaper alternatives like biosimilars. “

UConn’s Cesur said containing drug costs would require action on several fronts. But he said supporters of HR 3 were justified in wanting to focus on Medicare’s negotiating powers now.

“To say Medicare shouldn’t negotiate – that doesn’t make sense to me. Should we say that Walmart should not negotiate when buying? Of course, they should negotiate, ”Cesur said. “I do not see anything violated regarding the principles of an efficient and free market.”

[email protected]; twitter: @paulschott

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