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The U.S. Senate made the right call a few weeks ago and passed a bill to crack down on Big Pharma’s egregious patent thickets – a welcome development to the seemingly never-ending, but necessary, debate on how best to address prescription drug pricing in our country.
Now, the House of Representatives has the opportunity, during an upcoming Committee on the Judiciary hearing, to take the same approach by pledging to hold Big Pharma accountable for their anti-competitive practices and rejecting their baseless blame game to target every other entity in the prescription drug supply chain but themselves. Representative Moore in the Yellowhammer State sits on the committee, and Alabamans will be watching to see what he does during this pivotal discussion.
For too long, drug companies have curtailed competition in the marketplace through ridiculous patent shams to keep more affordable alternatives from their competitors from entering the market. Alex Brill, founder and CEO of Matrix Global Advisors (MGA) and health care economists, explained:
“The longer brand companies can unduly keep competitors off the market, the more excess profits they earn. In January 2023, we looked at five brand drugs known to be protected by patent thickets (Enbrel, Eylea, Humira, Imbruvica, and Opdivo) and estimated the one-year cost to the US healthcare system from delayed competition. Humira, long the posterchild of patent thickets, finally (and slowly) began facing competition last year after more than 20 years on the market. The other four drugs are still protected from generic or biosimilar competition. By our estimate, the one-year cost of patent thickets around these four products ranges from $1.9 billion to $3.1 billion per drug.”
The only way to effectively lower drug prices in our country is to address the root cause of the problem and that’s Big Pharma’s anti-competitive tactics and these companies know that. That’s why drug manufacturers have instead aggressively pushed lawmakers on a little-known entity called pharmacy benefit managers (PBMs). PBMs are free market forces that actually leverage competition and scale, acting as a much-needed counterbalance to Big Pharma and their otherwise outsized pricing power.
PBMs negotiate directly with drug companies to secure price concessions, or rebates, so health plan sponsors can access those savings to use them to help their employees and those covered under employer-sponsored insurance see lower premiums and cost-sharing, and even more comprehensive benefits. The role of PBMs actually results in $1,040 per person per year in savings.
What’s Pharma to do when there is a roadblock to even more profits? Convince Congress that PBMs somehow increase drug prices and lawmakers should undermine the role they play, labeling it as a “drug pricing fix.”
This strategy has worked well enough that many lawmakers have actually begun to buy into this narrative and consider policies that hurt Americans’ pharmacy benefits. Legislation like “delinking” in particular takes away PBMs’ incentive to negotiate bigger savings from drug companies. Banning market-based incentives would lead to increased health care costs. Alex Brill estimates that this misguided policy would hike health care premiums by more than $39 billion annually in the Medicare Part D program and commercial health insurance market. Drug companies? They would see a more than $32 billion windfall paid for at the expense of American employers, patients, families and taxpayers.
With two approaches on the line, one with a hefty price tag of $39 billion that would actually boost drug company profits and do nothing to address high drug prices and another with a Congressional Budget Office (CBO) estimate to save $3.019 billion, let’s hope Representative Moore and the rest of the House Committee on the Judiciary choose the right one.
