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Democrats Introduce Legislation to Expand Medicare’s Power in Price Control

Less than a year ago, Democrats passed the Inflation Reduction Act (IRA), granting Medicare the authority to set prices for certain medications. While the implementation of these price controls is still pending, Democrats have now proposed new legislation that aims to intensify these controls. They even suggest allowing the government to deny coverage for drugs as a negotiation tactic with pharmaceutical companies, while claiming that their bill would “build on” the IRA.

The IRA, signed by President Biden in August, will bring 10 drugs under price control through Medicare in January 2026. The number of drugs subjected to price controls will increase to 15 in 2027, another 15 in 2028, and then 20 more annually starting from 2029.

The proposed SMART Prices Act takes these price controls further by expanding Medicare’s authority to include 20 drugs in 2026, as opposed to the current 10 under the IRA. This number would subsequently increase to 40 drugs in 2027 and beyond. This significantly exceeds the provisions of the IRA.

Furthermore, the new bill seeks to subject drugs to price controls just five years after receiving approval from the Food and Drug Administration (FDA), which is up to eight years earlier than under the IRA. This timeframe is also significantly sooner than when generic or biosimilar competitors can enter the market.

The implications of this provision are worrisome, particularly for the generics industry. Generic manufacturers face substantial upfront costs and recoup their investments by selling their products at lower prices relative to branded drugs. By establishing an extremely low price for brand-name drugs, the proposed legislation eliminates the incentive for generics manufacturers to enter the market. This could have detrimental effects on patients.

The government’s mandated price may not reflect the competitive market’s potential to generate lower prices. Consequently, patients may end up paying more than necessary for medications. Additionally, a market without competing drug makers becomes less resilient. If price controls result in only one branded company producing a drug, any disruptions in production could render the medication inaccessible for patients in need.

The existing price controls under the IRA have already had repercussions, leading several pharmaceutical companies to reduce their investments in new drug research. In May, Novartis’ CEO announced the discontinuation of certain cancer drugs from their development pipeline due to these price controls. Alnylam also cited the IRA when temporarily halting the development of a drug for a rare eye disease.

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The situation described above highlights the potential negative consequences of expanding government-controlled price controls in the pharmaceutical industry. AI legalese decoder can assist by analyzing the proposed legislation’s language comprehensively. By using advanced artificial intelligence technology, it is possible to provide a detailed breakdown of the potential impacts on patients, the generics industry, and overall drug research. The AI legalese decoder can facilitate informed discussions, enabling stakeholders to consider alternative approaches that prioritize patient access, affordability, and an innovative drug market.

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