Healthy Men Inc. (HMI) applauds the federal government’s decision to address American patients’ very real concerns about drug prices in the US. However, in our analysis, the approach they’ve chosen is not only the wrong solution, but also is being badly applied.
On August 15, 2024, the Centers for Medicare and Medicaid Services (CMS) released the long-anticipated list of ten medications that are subject to a “negotiated price” between the federal government and the drug innovators. This supposed negotiation of drug prices was part of the controversial Inflation Reduction Act of 2023. On the surface, the laudable and important goal was to stabilize or reduce what folks on Medicare and Medicaid pay for prescriptions. Healthy Men Inc. supports this goal, but we remain skeptical about the requirement for government price setting, embodied in the IRA as price-negotiations, and disappointed in the CMS process of implementing these provisions so far. We are also more concerned about the impact this process and the price controls will have on the stability and reliability of the US medication supply, as well as on access and innovation. We believe these concerns are well founded in light the draconian, deep cuts that the federal government has made to the prices it will pay for 10 life-saving medicines. Here’s why:
Federal government price caps, price setting, price fixing, cost controls, market-management, or whatever else it may be called simply don’t work. Period. Time and time again, such mandates have led to disastrous results. In most cases, price fixing leads directly to product shortages and reductions in consumers’ access to—and the quality of—those products. At the same time, price fixing removes incentives to innovate. Which leads to stagnation in product development. These are not simply theoretical concerns, government price controls in many countries outside of the US have not led to consumer price relief but instead have led to higher prices for lower quality products and shortages in many consumer goods sectors. This is especially true in high-technology sector, whenever the free-market that made the US the world leader in R&D for decades is undermined by government intervention and control. And we believe that the same will happen if pharmaceutical price controls are allowed to take effect.
Even though the controls for the first 10 medications won’t kick in until 2026, the feds are already (and prematurely) declaring the program a success. Not surprisingly—yet to the astonishment of many business leaders—the feds have even expressed interest in using the same anti-free-market approach to other market sectors such as housing, food, and appliances.
The CMS approach to implementing the price negation provisions has been badly applied. To start with, instead of actually negotiating, the government bureaucrats presented their medication price caps as “take-it-or-leave-it.” The absence of traditional give-and-take negation made many commercial leaders feel that the process was like “negotiating with a gun to your head”.
Intellectual property owners, manufacturers, distributors and, of significant importance to our patient advocacy community, patient voices and opinions were given only a veneer of consideration. For example, while CMS did request patient organization input to the process, as required, the approach used was inadequate, did not meet long-established dialogue practices by other federal agencies, and still leaves patient organizations very much in the dark about many important factors, including how to ensure patients are advised about access changes due to price caps, and an analysis of what the calculated savings to patient out-of-pocket expenses will be. Ironically, CMS’s plan to implement and adjudicate and implement these programs has been turfed to for-profit Pharmacy Benefit Management (PMS) companies. These powerful, multi-billion-dollar businesses are currently being vigorously investigated in both public and private sectors for abusing their role in medication cost management, which has led to increased out-of-pocket costs for patients. That simply doesn’t make sense. For additional information on HMI’s views about PBMs, visit https://healthymen.org/addressing-the-pharmacy-benefit-management-pbm-systems-to-improve-patient-out-of-pocket-drug-costs/
In addition, CMS locked down the process they used to calculate the price caps; no one—not commercial entities or patients—knows what factors were considered. Worse yet, CMS won’t reveal their process until March 2025, well after the second round of ten more “negotiated-prices” are set.
Healthy Men Inc. believes that market choice and true give-and-take, market-based negotiations are key components to a long-term, equitable solution to patient out-of-pocket medication pricing. Plus, they align with the commercial market philosophy that has been the mainstay of US economic growth and consumer values. For more on HMI’s five core principles for Fair and equitable market-choice grounded medication price negations visit https://healthymen.org/five-principles-for-prescription-costs-reform-industry-middle-managers-are-driving-prices/
Patient advocacy organizations need to pay attention to the devil in the details. Addressing HMI’s concerns—and those of others– is critical, not only to creating an equitable price structure and process that can achieve the noble goal of reducing near-term costs, but also to avoiding irreparable harm to market access, choice, and innovation for life-saving medications.
