US Senator Bernie Sanders has proposed price caps on drugs developed with federal funds from the Centers for Disease Control and Prevention (CDC) or the Biomedical Advanced Research and Development Authority (BARDA), following a political career battling against high drug prices. Given that big pharma is already challenging price cuts in the Inflation Reduction Act, even if Sanders鈥檚 legislation passes, it may not be successfully implemented in the face of legal opposition from the industry.
Sanders鈥檚 proposed bill could be another hit on the profitability of US drugs following the Inflation Reduction Act of August 2022, which aims to lower prescription drug prices by setting prices for medicines covered by Medicare. The trade organization PhRMA claims that lowering drug prices will discourage innovative drug development.
Bernie Sanders proposes, in a 3 July Senate draft bill with bipartisan support (鈥樷�榯he 2023 Reauthorization of the Pandemic and All-Hazards 6 Preparedness Act), that the US price of a product developed with support from the CDC or BARDA must not exceed the lowest price charged for it in Canada, France, Germany, Italy, Japan, or the UK. Outside the US, national health authorities such as the UK鈥檚 NICE assess the cost-benefit of new drugs and negotiate prices with companies, driving prices substantially lower than in the US. Sanders鈥檚 proposal would essentially move towards standardizing drug prices globally but might also reduce pharma companies鈥� desire to seek US government funding.
Big pharma fights back against revenue loss
Pharma companies are already mounting legal challenges to price reduction efforts. In June 2023, & Co. (Kenilworth, NJ, US) filed a lawsuit against the US government in response to the Inflation Reduction Act. Merck stated that 鈥渙nce the Department of Health and Human Services unilaterally selects a drug for inclusion in the program, its manufacturer is compelled to sign an 鈥榓greement鈥� promising to sell the drug to Medicare beneficiaries at whatever 鈥榝air鈥� price the agency dictates, which must represent at least a 25% to 60% discount. If a manufacturer refuses to participate in this 鈥榥egotiation鈥� or declines to 鈥榓gree鈥� to sell at the mandated price, it incurs a ruinous daily excise tax amounting to multiples of the drug鈥檚 daily revenues鈥�.
In a separate lawsuit related to the Inflation Reduction Act, (New Jersey, NJ, US) and the US Chamber of Commerce are also suing the US government. PhRMA, the Global Colon Cancer Association, and the National Infusion Center Association have similarly filed a lawsuit stating the Inflation Reduction Act鈥檚 Drug Price Negotiation Program is a government mandate disguised as negotiation and is unconstitutional. The effect of these, if successful, will be to delay or entirely stop the Medicare drug price negotiation program. The US government can try to curb high drug prices with other measures, such as Sanders鈥檚 bill, but is likely to face legal opposition to those measures as well.
As shown in Figure 1, a substantial number of US grants have been issued to pharma companies with marketed innovator and biosimilar drugs during 2013鈥�22. These grants had a combined grant value of $4m. The largest of these grants was awarded by The National Institute of Allergy and Infectious Diseases (Bethesda, WI, US) to (New York, NY, US) in 2008 for $1m to fund SIGA-246, a smallpox antiviral.
US Tariffs are shifting - will you react or anticipate?
Don鈥檛 let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataFigure 2 shows that a large proportion of marketed innovator and biosimilar drugs receiving US grants during 2013鈥�2022 have outsourced their manufacture. These include blockbuster drugs such as 鈥檚 (Cambridge, UK) Evusheld and 鈥檚 (Cambridge, MA, US) Spikevax, which are manufactured in high volumes. This group of marketed drugs is outsourced to the largest CMOs, such as (Somerset, NJ, US), (Visp, Switzerland), Patheon (Waltham, MA, US), and Vetter Pharma (Ravensburg, Germany). For Covid-19 vaccines that received grants, there tended to be multiple CMOs involved in the API and dose manufacturing, as well as the packaging.
