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The Pharmaceutical Research and Manufacturers of America (PhRMA) represents the country’s leading innovative biopharmaceutical research companies, which are laser focused on developing innovative medicines that transform lives and create a healthier world. Together, we are fighting for solutions to ensure patients can access and afford medicines that prevent, treat and cure disease. Over the last decade, PhRMA member companies have invested more than $850 billion in the search for new treatments and cures, and they support nearly five million jobs in the United States.
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WASHINGTON, D.C. (August 14, 2024) – Pharmaceutical Research and Manufacturers of America (PhRMA) President and CEO Steve Ubl released the following statement on government price setting in Medicare Part D under the Inflation Reduction Act (IRA).
“The administration is using the IRA’s price-setting scheme to drive political headlines, but patients will be disappointed when they find out what it means for them. There are no assurances patients will see lower out-of-pocket costs because the law did nothing to rein in abuses by insurance companies and PBMs who ultimately decide what medicines are covered and what patients pay at the pharmacy.
“As a result of the IRA, there are fewer Part D plans to choose from and premiums are going up. Meanwhile, insurers and PBMs are covering fewer medicines and say they intend to impose further coverage restrictions as the price-setting scheme is implemented. More than 3 million beneficiaries taking medicines with government-set prices will pay more in 2026.
“The IRA also fundamentally alters the incentives for medicine development. Companies are already changing their research programs as a result of the law, and experts predict this will result in fewer treatments for cancer, mental health, rare diseases and other conditions. Medicine development is a long and complex process, and the negative implications of these changes will not be fully realized for decades to come.
“The ironically named Inflation Reduction Act is a bad deal being forced on American patients: higher costs, more frustrating insurance denials and fewer treatments and cures for our loved ones."
Additional background:
The IRA price setting process is anything but “negotiation.” Once a manufacturer’s medicine is selected for price setting, there are only two options if the manufacturer does not capitulate to the government and its unilaterally determined price:
- Pay a tax of up to 1,900% (not 95%) on the total sales revenue of the medicine selected for price setting. News coverage misreports the tax as an “up to a 95% tax.” To be sure, a 95% tax on all sales would be devastating, but the real tax is up to 1,900% due to the convoluted formula in the statute.
- Watch all their medicines get withdrawn from Medicare (Parts B and D) and Medicaid, not just the medicine selected for price-setting. Even if manufacturers were to consider this option, it’s not up to them; CMS gets to decide. A manufacturer-initiated withdrawal would take 11 to 23 months to take effect, during which period the manufacturer would be required to disclose proprietary information and “agree” with CMS’ actions.
Press Release
Medicare
PhRMA Statement on Government Price Setting in Medicare Part D
PhRMA Statement on Government Price Setting in Medicare Part D image