Lawmakers seek balance between drug costs and innovation

Reps. Scott Peters (D-Calif.) and Mariannette Miller-Meeks (R-Iowa) said policy makers need to strike a balance between savings and innovation in the wake of the Inflation Reduction Act (IRA), which was passed about two years ago.

Peters, who represents San Diego, where several drug outfitters are based, has often pushed back against his party’s bolder plans for cutting drug costs. He warned Thursday against placing a short-term focus on savings, without considering the long-term costs to Americans.

“You would not come home and tell your your family we can save $10,000 by not fixing the roof because you think about the $30,000 you’re going to lose next year when it rains,” he said.

The IRA for the first time empowered Medicare to negotiate the cost of pharmaceuticals, starting with a list of 10 widely used drugs with relatively high costs.

While Peters supported the IRA, he warned that if lawmakers went too far in restricting profits, drug makers would not have an incentive to spend on development of new drugs.

“They can’t make a return, they won’t make those investments,” he said of drug producers.

The panel, “Medicare & Drug Pricing: Time to Think Differently,” was hosted by The Hill and sponsored by the Alliance for Aging Research. Steve Scully, contributing editor to The Hill, moderated the discussion.

Peters honed in on the importance of incentivizing drug makers to innovate, citing foreign dominance of the once-American semiconductor chips industry as a warning for the future of the U.S. pharmaceutical industry.

“The innovation economy is so important, and this is part of it,” he said. “We’re competing with people who want to take that.”

In May 2021, Peters was joined by nine Democratic colleagues in the House to protest an early version of the IRA in a letter to then-House speaker Nancy Pelosi (D-Calif.). He said the early version “would have made drugs eligible for negotiation the minute they came out,” which threatened to “kill the industry.”

“We did achieve the objective of protecting patients at the counter at $2,000 a year,” he said of the IRA. “We also added a cap on insulin spending at $35, so we provided the same relief for seniors that we set out to do at the beginning.”

The IRA capped out-of-pocket costs on outpatient drugs at $2,000 per year for Medicare recipients, and out-of-pocket costs for insulin at $35 for Part D enrollees.

Miller-Meeks said Congress should focus on pharmacy benefit manager (PBMs) reform as a way to save on drug costs and continue to incentivize drug makers without capping profits.

“You look at the PBMs, which are this opaque intermediary middleman, and what value do they bring?” she asked. “There is some value, but they are inflating drug prices.” 

PBM reform has been the topic of much debate and some hearings in Congress this session, but has yet to move forward to a vote in either chamber.

Peters also called for expanding patent protections on so-called orphan drugs, which are used to treat rare diseases. He said these drugs often have potential for wider use, but that expanding their use risked making the subject to negotiations.

“So there’s no incentive to invest in the use of existing drugs for new diseases, orphan diseases in particular,” he said.

Experts on the panel backed Peters’ emphasis on prioritizing and protecting the development of orphan drugs. Dana Goldman, a University of Southern California professor and founding director of the Schaeffer Institute for Public Policy, criticized the IRA’s current structure, alleging it punished manufacturers for innovating and finding other uses for their drugs.

“It kind of says to people who develop drugs for these ultra rare diseases orphan designations that if you find another, if you make too much money, if you find other ways to use your drug you’re suddenly going to be subject to negotiation, and we’re going to claw back some of your profits from you,” he said. 

Dr. Jennifer Ellis, a cardiac surgeon and co-chair of the Health and Public Policy Committee at the Association of Black Cardiologists, said patients had a voice in future pharmaceutical reforms.

“We all, through our taxpayer dollars, through our other choices, we all have a dog in this fight and that we also as consumers need to be part of this decision-making,” Ellis said about how much to prioritize costs.

“We need to be part of that discussion and we need to be making some of those practical cogent decisions.”