Pharma prepares to continue fight as drug pricing bill passes House

The pharmaceutical industry is gearing up to minimize the effect of major drug legislation passed by Congress on Friday, the first time in many years lawmakers have overcome the drug lobby’s opposition to limits on their pricing power.

On Friday, the House of Representatives passed the Inflation Reduction Act in a 220-207 party-line vote, sending the bill to President Joe Biden for his signature this week.

“Make no mistake. These measures are a big blow to pharma, which has had a stranglehold for decades, preventing us from making this move,” House Speaker Nancy Pelosi, D-Calif., said in a floor speech. “Now, we have relaxed that stranglehold a bit. More to be done, but giving more leverage and more breathing room to America’s families.”

The bill would allow Medicare to negotiate prices on up to 60 drugs by 2029, starting with 10 in 2026. Drugmakers will pay rebates for any Medicare drug price increases they take above the rate of inflation, and Medicare patients’ monthly out-of-pocket insulin costs are capped at $35. However, legislative rules and Republican opposition prevented Democrats from having those provisions also apply to private insurance.

The pharma industry spent heavily to lobby against the bill and, after decades of forestalling action to curtail the industry’s pricing power in the U.S., its main lobbying group signaled the fight would continue.

“After many months of legislative wrangling, we are left with a partisan, government price setting bill that will lead to fewer cures and treatments and doesn’t do nearly enough to make medicines more affordable for most Americans,” Stephen Ubl, CEO of the drug lobby PhRMA, said in a statement. “We will continue to advocate for commonsense and bipartisan solutions because the American people deserve better.”

Before the House vote, Ubl threatened to go after lawmakers who supported the bill, noting to Politico that bills passed with slim partisan majorities “rarely stick.”

The pharma industry is likely to sue to challenge the law as well as attempt to influence the rulemaking process and challenge any resulting regulations in court, wrote Rachel Sachs, a law professor at Washington University, in an analysis published by Health Affairs. The industry is also likely to “game” the process, such as by creating limited competition for products to disqualify them for price negotiations.

“The industry has also engaged in a decades-long effort to identify strategies that would allow its members to maintain their monopolies, including the establishment of patent thickets, pay-for-delay agreements, product hopping, restricted distribution networks, and other strategies,” Sachs wrote. “It would be surprising if this behavior stopped with the enactment of drug price negotiation legislation.”

Among the companies most exposed to price negotiations starting in 2026 are Bristol Myers Squibb, Pfizer, Amgen, Eli Lilly, AbbVie, GSK and Johnson & Johnson, Morgan Stanley analyst Terence Flynn wrote in a note to clients Monday. 

In response, pharma could launch products with higher initial prices in the U.S. and rethink some drug investments or launch strategies, Flynn wrote, estimating as high as a 4% negative impact to revenue in 2026. “We continue to see this as a manageable headwind for the industry,” he wrote.

The Congressional Budget Office in July estimated price negotiations would save $102 billion over the first six years, he noted. Annual drug spending in the U.S — the largest market for medicines — is expected to reach between $684 billion and $714 billion by 2026, according to IQVIA.

The bill could also shift research dollars away from small molecule drugs, such as some cancer treatments, industry CEOs have recently warned.

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