Setting the record straight on Historic drug pricing Law
In August, President Biden signed the Inflation Reduction Act of 2022 into law. The prescription drug price reforms in the Inflation Reduction Act are historic and their passage represents a monumental victory for patients, taxpayers, and the American people.
This law is a major blow to Big Pharma’s power, and opponents of the law are already spreading lies to scare patients and lawmakers in an attempt to block or undermine the law in order to regain the industry’s unilateral power to dictate prices of brand-name drugs. Below, we set the record straight with the truth about what the Inflation Reduction Act means for patients.
Opponents’ Claim: The Inflation Reduction Act will stifle innovation.
The Truth: The Inflation Reduction Act restores balance to maintain the innovation we need at prices we can afford.
Summary: The Inflation Reduction Act does not stifle innovation — it incentivizes it. Medicare negotiation is focused on old drugs that lack competition, encouraging drug companies to focus their resources on true innovation instead of copycat versions of old products designed to prevent generic competition from coming to market. Additionally, the law maintains the incentives for innovation that already exist by allowing drugmakers to recoup their research and development costs by setting their launch prices, maintaining the FDA-awarded period of exclusivity, and exempting all medications from negotiated prices for a 9-13 year period. According to the nonpartisan budget experts at the Congressional Budget Office (CBO), this law would decrease the number of new drugs over the next 30 years by only 15 out of 1,300 expected new drugs – that’s less than 2 percent. The Inflation Reduction Act levels the playing field, improves affordability for Americans, and brings our prices more in line with what other countries pay, all while incentivizing the innovation we need.
Patient Perspective: Don Kreis’ daughter, Rose, lives with a type of cystic fibrosis for which the current breakthrough medications don’t work. Rose is still waiting for her miracle drug, but Don fears when it comes to market, Big Pharma will price it out of reach. “When a new drug comes to market, will she be able to even consider taking it? No one cares more about innovation than us — but these drugs are worthless if Rose can’t afford them,” he writes.
Opponents’ Claim: The Inflation Reduction Act puts D.C. politicians in control, making it harder for patients to get the medications they need.
The Truth: The biggest barrier to patient access right now is the high prices of drugs. The Inflation Reduction Act will increase patient access by lowering prices.
Summary: High prices of brand name drugs block patient access. Far too many patients across the country struggle to afford their medications. A 2021 survey found that nearly 40 percent of patients did not take their drugs as prescribed due to high costs, and 20 percent of patients took on debt to pay for their medications. It’s estimated that more than 5 million Medicare beneficiaries had trouble affording their medications in 2019, with rates highest among Black and Latino seniors. If current trends continue, 1.1 million beneficiaries could die this decade because they can’t afford the drugs they need.
The Inflation Reduction Act will increase access to prescription drugs by lowering drug prices and out-of-pocket costs for millions of Americans. The $2,000 out-of-pocket cap that takes effect in 2025 is estimated to help more than 1 million enrollees each year and many millions over time, making prescriptions more affordable and accessible. The $35 insulin copay cap that takes effect in 2023 is expected to help 2.7 million Medicare beneficiaries afford the insulin they need to survive. And thanks to the Medicare negotiation and inflationary rebate provisions, patients will be paying their cost-sharing based on lower prices without the risk of outrageous price increases each year. More affordable and consistent medication costs will lead to more access, not less.
Patient Perspectives: Katherine Pepper, a Washington patient who lives with an autoimmune disease, takes Humira, a medication that has a monthly price of $6,409. As Congress was considering the Inflation Reduction Act, Katherine wrote, “As a senior living on a fixed income, I’ve had to choose between filling my Humira prescription or buying groceries. That’s a decision no one should have to make.”
Therese Humphrey Ball, an Indiana patient living with multiple sclerosis, shared about a time when she couldn’t access her medication at all because of its price. “In 2017, I was forced to go off of Copaxone entirely because I simply could not pay its $6,000 monthly cost,” she writes. “Without the medication I needed, I began having difficulty with my cognitive function. I work really hard to keep my life in order and my memory intact even with MS, so this was devastating. I lost something that is so valuable to me.”
Vanessa Ladson, a Delaware patient living with lupus and fibromyalgia, wrote, “I am on a fixed income, and I have to scrimp and save just to be able to eat. I can’t afford all of my prescriptions, including the blood thinner Eliquis, which is priced at $500 per month. Instead, I take a cheaper drug that gives me a higher risk of bleeding.”
3. Medicare Benefits
Opponents’ Claim: The Inflation Reduction Act would rob $300 billion from Medicare benefits.
The Truth: The Inflation Reduction Act cuts Medicare spending by lowering the prices the program pays for drugs. This saves taxpayers and patients money.
Summary: The Inflation Reduction Act actually saves Medicare nearly $300 billion and enhances Medicare benefits. Equating “cutting costs” to “cutting benefits” is a decades old tradition practiced by industry lobbyists who are fighting against policy efforts to address high prices in the health care sector. This lie, perpetuated by the pharma industry, has been debunked several times (KHN/Politifact and Washington Post and Politifact). In reality, the Inflation Reduction Act cuts Medicare spending by lowering the prices the program and Medicare beneficiaries pay for drugs. This saves taxpayers and patients money.
Fact Check: KHN/Politifact fact checked an ad by American Commitment that claimed the drug price reforms would drain “billions in funds” from Medicare. The fact checkers found the ad to be “false,” explaining, “The Medicare drug pricing plan results in savings, not the diversion of funds from the Medicare program.”
4. Out-of-Pocket Costs
Opponents’ Claim: Patients are more worried about out-of-pocket costs than prices. Insurance companies and PBMs are the ones who set out-of-pocket costs – the Inflation Reduction Act targets the wrong problem.
The Truth: We can’t lower out-of-pocket costs without lowering drug prices or we will just wind up paying higher premiums and taxes. The Inflation Reduction Act lowers list prices and out-of-pocket costs.
Summary: Big Pharma has attempted to create a false dichotomy by claiming patients only want their out-of-pocket costs to go down. If we reduce out-of-pocket costs without addressing underlying prices, patients will be forced to pay for pharma’s price gouging in other ways, such as increasing premiums, taxes, and less money in paychecks. The Inflation Reduction Act successfully lowers both list prices and out-of-pocket costs. Medicare negotiation directly lowers list prices, and the inflationary rebates will prevent drug companies from increasing drug prices faster than the rate of inflation which increases list prices and cost-sharing. Since Medicare beneficiaries pay for their drugs based on list prices, these reforms will directly lower cost-sharing for patients by lowering list prices. Additionally, contrary to pharma’s claims, the Inflation Reduction Act implements monumental out-of-pocket cap protections for patients by capping out-of-pocket costs to $2,000 a year and capping insulin copays at $35 each month for Medicare Part D beneficiaries. The Inflation Reduction Act effectively balances the need for lower list prices and lower out-of-pocket costs.
“Keep Money in Our Pockets”
5. Bipartisan Support
Opponents’ Claim: The drug price provisions in the Inflation Reduction Act were unpopular partisan reforms.
The Truth: The drug price reforms in the Inflation Reduction Act have overwhelming bipartisan support across the country.
Summary: 80 percent of Americans – including majorities of Republicans, Democrats, and independents alike – support the drug price provisions in the Inflation Reduction Act. The drug price reforms are among the most popular policies included in the law. Nearly 90 percent of voters said drug pricing is an important issue heading into the November midterm elections, and 3 in 4 said a failure by Congress to lower drug prices would affect their vote. Diverse groups across the country support the drug price provisions, including over 85 percent of small business owners in support of Medicare negotiation and out-of-pocket caps and 91 percent of Latino voters supporting Medicare negotiation. In August, days before the Senate passed the Inflation Reduction Act, over 75 groups representing patients, consumers, seniors, unions, small businesses, employers, physicians, nurses, and disease advocacy and human rights organizations signed a letter urging Congress to pass the drug price reforms. The only place where drug price reforms are partisan is in Congress. For everyone else the reality is clear: Americans struggling under high drug prices want the government on their side to deliver more affordable prescription drugs.
Patient Perspective: “Make no mistake, this legislation is game changing. It alters the trajectory of drug pricing and policy in the United States. It finally begins to break the power of multinational drug corporations to dictate prices of brand name drugs to the American people. It marks a shift to reforming the system in order to make it work for the people it is supposed to serve – rather than the people who profit from it,” says David Mitchell, a patient with incurable blood cancer whose drugs carry a list price of more than $900,000 per year and founder of Patients For Affordable Drugs Now.
6. Relief for Patients Who Use Insulin
Opponents’ Claim: The Inflation Reduction Act leaves out people who take insulin.
The truth: The Inflation Reduction Act provides relief to millions of Medicare beneficiaries who use insulin. The reconciliation process under which the law was passed in the Senate limited the types of reforms that could be included in the bill, which is why the fight for reforms to help all Americans who take insulin and other expensive drugs must continue.
Summary: The Inflation Reduction Act is estimated to provide savings to 2.7 million Medicare beneficiaries who take insulin thanks to the $35 insulin copay cap. Those beneficiaries are expected to save an average of $1,200 each year. Additionally, many patients who live with diabetes have other conditions that require expensive drugs. Thanks to the $2,000 out-of-pocket cap, Medicare Part D patients will save thousands and have more predictability in their expenses. Insulin manufacturers are notorious for increasing insulin prices. The Inflation Reduction Act will rein in price hikes by penalizing companies when companies increase prices above the rate of inflation. We will keep fighting for reforms that lower drug prices for all Americans on insulin and other expensive medications.
Patient perspective: New York type 1 diabetes patient advocate, Bob Parant, is grateful for the insulin reforms: “The reforms passed in the Inflation Reduction Act will make a huge difference in my life. The new $2,000 cap on out-of-pocket costs for my prescriptions plus the $35 insulin copay caps mean that I’ll spend much less each year on my drugs. With lower drug costs, I’ll be able to visit my grandchildren more and not worry as much about my retirement funds.”