House Democrats unveil new legislation that expands the Inflation Reduction Act

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In late July, Democratic health leaders from the US House of Representatives proposed new legislation that would expand the Inflation Reduction Act and further lower prescription drug prices. The Lower Drug Costs for American Families Act was unveiled by the House Democrats Frank Pallone Jr., Richard Neal, and Robert Scott, and attempts to build on the progress made by the Inflation Reduction Act.

The price of prescription drugs in the US is one of the highest in the world, making this market the most profitable market for pharmaceutical companies to enter. The Inflation Reduction Act, approved last summer, contained several provisions aimed at lowering the price of drugs for those under Medicare coverage. These measures include allowing the US government to negotiate the price of drugs for the first time in US history, while also imposing rebates to pharma companies that increase the price of their drugs faster than the rate of inflation. Democrats had hailed the landmark legislation as successful since the Inflation Reduction Act could generate significant savings for Medicare and for the US population. The Lower Drug Costs for American Families Act builds off this success and introduces several new policies to further lower the cost of healthcare and prescription drugs for more Americans.

The new bill would extend the Inflation Reduction Act in three ways. The bill proposes to expand the drug price negotiation program to all Americans with private health coverage, apply the inflation rebates to all Americans with private health coverage, and more than double the number of prescription drugs selected for negotiation from 20 to 50 medicines. Expansion of the mentioned provisions into the private insurer market would mean approximately 164 million people and their families, and 26 million on marketplace coverage, would be targeted. In addition, the expansion of inflationary rebates into the private market could also mean US workers could possibly save $40bn over the next ten years. The Democrats who introduced the bill commented that the purpose of the bill is to continue to address the rising price of drugs in the US, where Americans pay far more for the same drugs as people in other countries, and is the next step in bringing down the costs of prescription drugs.

However, the pharmaceutical industry has already begun reacting negatively to the proposed legislation. A pharmaceutical industry group, PhRMA, has been cited stating that the new bill would give the US government full control over the US healthcare system, including in the private market. PhRMA has further commented that the proposed legislation would lead to restricted access and fewer treatments for the US population. Pharma companies, like Novartis, had echoed PhRMA’s sentiment and further highlighted the negative impact of further drug price controls, including harm to patients and complicating R&D decisions. To mitigate the potential loss in profit that may occur from the impact of the Inflation Reduction Act when the government negotiates drug prices, some pharma companies have resorted to dropping drugs from their pipeline entirely. The reaction by the pharmaceutical industry is unsurprising given that several pharma companies and pharmaceutical industry groups have already launched lawsuits against the US government over the Inflation Reduction Act, claiming violations of the US Constitution. More lawsuits will likely arise in the future and the pharmaceutical industry will oppose any new legislation that builds off the Inflation Reduction Act.

Despite this complication, the US Government appears unfazed by the recent litigation from the pharma industry against the original legislation and continues to go further in cutting US drug prices. Any successful legislation that builds off the Inflation Reduction Act could signal a paradigm shift in US drug pricing. The pharmaceutical industry will see some relief, however, since House Democrats will face an uphill battle in a Republican-dominated House. Republican opposition towards the Inflation Reduction Act has been known for quite some time, with Republicans voicing their opposition last summer before its approval. The party will likely continue to express negativity towards the law.