White House Threatens to Penalize Pharma Companies for High Prices
WASHINGTON — The Biden administration announced a plan Thursday to lower prescription drug costs in a move that takes a tough stance toward pharmaceutical companies charging high prices.
If the Federal Trade Commission determines the prices are unreasonable, the new policy allows the federal government to take away some companies’ patents and licenses to produce the drugs and give them to competitors.
“As part of the president’s Bidenomics agenda, the Biden-Harris administration is cracking down on price gouging and taking on special interests to lower costs for consumers and ensure every American has access to high-quality, affordable health care,” a White House briefing statement said.
The new policy follows a Food and Drug Administration warning last month that some consumers are endangered by trying to reduce their drug expenses through cheaper online purchases. Some of the patients have died.
The government’s authority to take away patents or force companies to grant commercial licenses is called march-in rights. They are derived from the Bayh-Dole Act of 1980 but never have been exercised by the government until now.
The policy also appears to advance President Joe Biden’s reelection platform based partly on lowering health care costs.
The march-in rights would be enforced against pharmaceutical companies only if their drug development was paid at least partly by the government with tax revenue.
Nearly 30% of Americans report difficulty paying for their medications, according to a survey released in July by health policy research organization KFF. At the same time, some of the taxes they paid contributed tens of billions of dollars to drug development in the past decade.
The Biden administration said the policy allowing march-ins would encourage competition in the pharmaceutical industry.
Major drug companies said the policy would remove financial incentives for them to develop drugs based on the latest research and development, ultimately hurting customers who could benefit from them.
“This would be yet another loss for American patients who rely on public-private sector collaboration to advance new treatments and cures,” the trade group Pharmaceutical Research and Manufacturers of America said in a statement. “The administration is sending us back to a time when government research sat on a shelf, not benefitting anyone.”
The Congressional Budget Office reported the pharmaceutical industry spent $83 billion to develop new drugs in 2019. It costs the corporations $1 billion to $3 billion on average before they can start marketing their drugs.
Their payback can be much more. The U.S. pharmaceutical industry earned $550 billion in 2021, or nearly half the global market, according to the data research firms Statista and Zippia.
A 2021 Rand Corporation study found Americans pay the highest prices in the world for prescription drugs at 2.56 times higher than 32 comparable countries.
The Biden administration pushed back against industry assertions that the march-in policy would hurt consumers, instead blaming high drug and health care prices on “corporate greed.”
Part of the problem is consolidation in health care markets, according to a White House statement. It said mergers among hospitals in concentrated markets led health care rates to increase more than 20% in many cases.
“Currently the 25 largest pharmaceutical companies control around 70% of industry revenues,” the White House statement said.
Previous Biden administration efforts to rein in drug prices included capping the cost of insulin at $35 per product per month for seniors, allowing Medicare to negotiate lower prescription drug prices and requiring drug companies to pay rebates to Medicare if they raise prices faster than the inflation rate.
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