US Drug Pricing changes to follow after Inflation Reduction Act

The US pharmaceutical sector is bracing for additional challenges within its most lucrative market as Democratic health leaders in the US House of Representatives introduced new legislation aimed at expanding the Inflation Reduction Act and further reducing prescription drug costs.

The Lowering Drug Costs for American Families Act, revealed by Frank Pallone Jr., Richard Neal, and Robert Scott, seeks to build upon the existing act and decrease healthcare and prescription expenses for Americans. This move is expected to create more pricing difficulties for the pharmaceutical industry, according to an analysis by GlobalData.

Cyrus Fan, a Pharma Analyst at GlobalData, explains, "The Lowering Drug Costs for American Families Act aims to enhance the Inflation Reduction Act through three key approaches."

The proposed changes involve extending the drug price negotiation program to encompass all Americans with private health coverage, implementing inflation rebates under the Inflation Reduction Act for individuals covered by private health plans, and expanding the selection of prescription drugs subject to negotiation from 20 to 50.

Gustav Ando, GlobalData's VP of Pricing and Market Access, points out that this proposition constitutes a "double whammy," since it doubles the number of drugs subject to price negotiations and broadens the scope to encompass the private insurance market. This move signals the government's intent to further reduce US drug prices, which are among the highest worldwide.

Fan adds that the Democrats' expansion of the Inflation Reduction Act is in line with their strategy to generate substantial savings for Medicare. He notes, "The legislation is another attempt by the Democrats to lower the costs of prescription drugs for more Americans.

This time, the legislation targets the private sector, which would include 164 million people and their families and 26 million on marketplace coverage, along with those under Medicare coverage. The extension on the inflation rebates could also mean privately covered US workers can save a possible $40 billion over the next 10 years."

Nevertheless, the pharmaceutical industry has responded negatively to these proposals, contending that they would grant the government full control over the US healthcare system, including the private market.

Critics also claim that the legislation could restrict patient access to treatments and influence pharmaceutical companies' decisions regarding research and development.

Fan concludes by acknowledging the industry's ongoing legal challenges against the Biden Administration regarding the Inflation Reduction Act. He states, "Given the current lawsuits the pharma industry has already launched against the Biden Administration over the Inflation Reduction Act, it’s unsurprising the new proposed legislation has quickly come under scrutiny from the pharmaceutical industry. The industry will have some relief from the fact that the US House of Representatives is controlled by the Republicans. Many Republicans had voiced opposition to the Inflation Reduction Act last year and the House Democrats will have difficulties passing the legislation through the House. Any successful legislation that builds off from the Inflation Reduction Act could signal further policy changes for US drug pricing."