The IRA Drug Price ‘Victory’

Yves here. Readers have noticed that the much-touted drug price restrictions in the Inflation Reduction Act are almost entirely optical. This piece is a good overview of how that comes about and might be useful to share with family members and friends who’ve bought the hype.

By Thomas Neuburger. Originally published at God’s Spies

Note the prices of these three insulin products in India

Seems, madam! Nay, it is; I know not “seems.”
—Shakespeare, Hamlet

If you’re anywhere near a news machine at all, you’ve heard about Joe Manchin’s IRA (“Inflation Reduction Act”) bill, and with respect to drug pricing, you’ve probably seen headlines like these…

Thanks to the Inflation Reduction Act, Medicare is on track to negotiate drug prices (MarketWatch)

Senate OKs sweeping bill lowering drug prices and promoting clean energy, setting up major Biden win (USA Today)

…offset by headlines like these…

Schumer Lets Aide Kill Key Drug Price Reforms: The decision comes as Schumer is now the Senate’s #2 recipient of pharmaceutical industry campaign cash (David Sirota / Lever News)

Democratic drug pricing bill removes insulin cost cap (The Hill)

The drug-price provisions of the shiny IRA bill are being touted from many corners, and in truth, one provision does represent a crack in the wall of drug-price obstruction. But that crack is so small that no one in the industry will shed private tears over its appearance — though for-show public tears are bound to flow, the better to fool you with.

To put it bluntly, the drug-price victory that many people are celebrating is far less than it seems.

Here’s a handy summary from The Hill of the contents of the bill. This is about its health care provisions:

Medicare can negotiate lower prices.

The bill would allow Medicare to negotiate prices for some drugs for the first time, a policy Democrats have been trying to enact for years over the fierce objections of the pharmaceutical industry. The provisions save more than $200 billion over 10 years.

• It would allow Medicare to negotiate lower prices for 10 high-cost drugs beginning in 2026, ramping up to 20 drugs by 2029. There is a steep penalty if a drug company doesn’t come to the table: a tax of up to 95 percent of the sales of the drug. There is also a ceiling that the negotiated price cannot rise above.

• In a deal with moderates including Sen. Kyrsten Sinema (D-Ariz.), only older drugs are subject to negotiation after a period of nine years for most drugs and 13 years for more complex “biologic” drugs. That means the negotiations are more limited than many Democrats wanted.

So Medicare can negotiate lower prices:

  • But for 10 drugs only … starting four years from now
  • Followed by 10 more drugs only … starting three years after that

Meanwhile, more than 20,000 prescription drugs are marketed and sold in the U.S. At the rate of 10 new drugs covered every three or four years, let’s see … carry the four … you’ll be dead before less than 1% of them are price-controlled. Call that a win for the industry.

Add to that the sweet deal Sen. Sinema cut for her clients (sorry, friends in rich places), sweet because “older drugs” (like insulin) and “biologics” (like Humira and Eliquis) are where the real money is.

Humira, an arthritis medication, can be had “with coupon” for as little as $6,300 per carton of two pens, down from $9,200 retail.

Eliquis, a blood clot and stroke preventative, can be had for as little as $510 for 60 tablets. As a maintenance drug, that’s about 10 days’ worth.

None of those prices will be coming down ever under this agreement, if “ever” means after most of those who need the relief are dead.

The climate provisions of the IRA bill are another discussion. Supporters are claiming the bill will cause a “40% reduction” in greenhouse gases by 2030. I find this claim incredible on the simple evidence that our friends at Big Oil will never take that big a haircut, ever. You’ll get cheap insulin before they take that big a loss. But more on that point later.

In the meantime, yes, applaud the passage of the IRA bill. But no, don’t do a victory dance yet — the splinters and tacks on the floor may damage your feet.

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  1. KLG

    “…useful to share with family members and friends who’ve bought the hype.”

    And medical students, who begin their first year this month. Get ’em early.

    And for those of us of a certain age, wasn’t that photograph of Schumer in front of the IRA sign precious!

    1. Louis Fyne

      awful diet, sedentary lifestyle, stress/”bowling alone” effect, people self-medicating with alcohol, tobacco, etc to handle said stress.

      (most americans die of heart disease and stroke, then accidents+guns—even if all cancer was cured today, average life expectancy would increase by less than five years).

      handing out antidepressants like candy as a first resort.

      1. FriarTuck

        Yep, the USA – as currently organized – is not designed for healthy human life.

        It is currently organized for “homo economicus”.

    2. Oh

      Americans want everything NOW and drugs promise the cure (but never deliver). there are many way to cure ailments through herbs, exercise and patience but most Americans believe the FDA and the drug company ads. Most of the drugs they peddle have strong side effects.

    3. QuicksilverMessenger

      Not that long ago, there might be one or two ‘drug stores’ in your town. Mine had Buzz Green’s. That was where you got your prescriptions.
      Now almost every main street has a different chain drug store on each corner! Every grocery store has a pharmacy in it. Every other advertisement on regular TV is for pharmaceuticals.
      This is the sea we swim in. Everything medicalized; everything drug-ified. Madness.

  2. zagonostra

    Received a message in my inbox this morning from Bob Casey, my Dem senator from PA. First paragraph reads:

    Senate Democrats just passed one of the most significant pieces of legislation in my lifetime. The Inflation Reduction Act won’t just tackle rising costs for working families. It also finally gives Medicare the authority to negotiate drug prices, protect access to affordable health care for millions of Americans…

    I responded with a link from NC article along with some other items that countered his “messaging” on Senate Democrats passing one of the most significant pieces of legislation in my lifetime.?

    1. Arizona Slim

      Bob, Bob, Bob. You forgot the two most important words in any communication from the Donkey Party:

      Fighting For

      1. Laura in So Cal

        From the article, the government CAN negotiate lower prices with drug companies, not MUST negotiate lower drug prices. Given the cozy relationships between big pharma and the government (CDC, FDA etc) as exposed by the covid debacle, alzheimers drugs etc., this is a nothing burger even if it started today.

    2. Jason Boxman

      And now they’re gonna lie about what’s actually in it, because liberal Democrats think people are too stupid to understand how far into the future these limited benefits begin, or how paltry they actually are. How disgusting.

  3. LAS

    By the time these price caps are implemented, the drugs specified by the legislation will likely be losing or have lost their exclusive patents, and drug companies will have new products. Nonetheless, the legislation demonstrates that Medicare COULD theoretically negotiate prices and how they might go about it. That prospect could in turn galvanize advocates to keep fighting, public health researchers to estimate the impact on patients, and GBO the impact on tax payer constituencies. Maybe that’s worth something.
    It’s really amazing how lobbyists have tied up Congress from protecting the populations they are elected to serve. Why do we permit federal representatives to be so open to influence? Beats me. Oh, right, money.

    1. Susan the Other

      The “Inflation Reduction Act” is a scheme to gradually adjust our “economy” to a minimum standard of social equality in order to maintain political control. And more importantly to maintain the obscene wealth of the 1%. The only reason there is a need to adjust our economy gradually is because if we do not attempt to achieve a balanced economy (which will come at the expense of the dollar, aka gradual devaluation, but hopefully along with all other currencies devaluing as well, etc.), then we will be forced to continue to impoverish 90% of our own population with accelerating inflation purely in order to maintain a “strong dollar.” My opinion, but it does look familiar. This is actually an improvement (the IRA) over that previous alternative. So it’s the new doublespeak: “Inflation Reduction” is misleading – it merely reduces the rate of inflation. (Still better than the alternative.) And hence, to all our amusement, Biden could justify stepping up to the podium yesterday to claim that “Inflation is now zero.” He did not specify that he was speaking of the inflation “rate.” So he managed to make himself look even more clueless than before. I think your “That prospect could in turn galvanize advocates to keep fighting…” is spot on. It will.

      1. Anthony G Stegman

        In what ways will the “inflation Reduction Act” reduce the rate of inflation? Since the majority of the inflation we are experiencing is driven by high corporate profits I would expect the impact of the act on inflation to be minimal for the simple reason that business profits are not going to magically decline. In fact, they may well continue to increase due to the corporate subsidies provided in the legislation.

        1. Susan the Other

          Just my guess – we already let inflation take off like a rocket and said “nothing to see here”, so much of the de-facto devaluation has happened, but it remains to filter down through the economy. And globally as well. We (Brandon himself) have now called this situation “zero inflation” because we are at a point where we are going to control the rate of inflation, allow it to gradually expand. So, if I’m close, corporate profits will get a haircut about now and that might be the reason for corporate subsidies in the bill. The objective of all this is to create social and economic stability, imo. Create both a recession and inflation. Interesting.

  4. Timothy Dutra MD PhD

    Our “Representatives” in Congress have no empathy for us because of the comprehensive, including medications, health coverage they’ve given themselves.

    1. Dave in Austin

      I’ve tought that everyone should be allowed into the Congressional Health Plan and the plan should be required to break even.

      And my medicines are cheap: swim 1.25 miles four days/week; walk a very fast 4 miles two days; hit the weight room one day. Who says self-medication doesn’t work?

    2. John Wright

      Are you are implying that Congress needs more direct feedback of the health cost effects to understand the damage that is being done?

      Requiring them to use Obamacare, with possible high additional costs, might have little effect because our “Representatives” have very lucrative side hustles in influence peddling and revolving door jobs for themselves and their families as long as they cater to special interest groups such as the medical industry..

      As a consequence, imposing higher medical costs on elected representatives may only result in better political optics for them as they do a Bill Clinton “I feel your pain” impression to the voters..

  5. Dan Lynch

    I’d like to see the “40% GHG reduction” claim fleshed out. My gut tells me that it is complete BS, and that in fact, GHG will likely continue to climb. After all, the Build Back Worse bill increases drilling and increases logging.

    Yes, there will be more EVs and solar panels — mostly for the upper class — but those will only reduce GHG if energy consumption is flat, which ain’t gonna happen.

    And where will the electricity come from to charge those EVs?

    BTW, earlier this year I installed a solar system on my home, but did not qualify for any tax credit, which seems to be the rule rather than the exception. There are so many restrictions on what qualifies for the tax credit, such that most DIY home solar does not qualify. You know who does qualify for the tax credit? — affluent people who hire a professional to install a high end solar system to charge their Tesla.

  6. sharonsj

    About 10 years ago, there was an arthritis drug I needed but couldn’t afford. I soon discovered I could have my prescription filled by a druggist in Canada and I could get three months worth for what one month would cost me in the U.S. Then Congress decided that drugs from Canada weren’t trustworthy and banned them. So the Canadian druggist would send me the pills via some island in the South Pacific. Then the drug got taken off the market because of side effects. But I still wonder why drugs now produced in China without proper supervision and quality control are somehow more trustworthy than those from Canada. P.S. Our health care system still sucks.

    1. Oh

      When they say that drugs from Canada aren’t trustworthy, they’re admitting the US pharma is not trustworthy. It’s time to nationalize the Pharma Industry and fire the execs.

    2. Thomas Schmidt

      Drive to Canada. I’ve bought many drugs in Quebec that are necessary to life, without a prescription. Except: not since they closed the border for Covid. I guess they figured out how to stop cheap drug imports.

  7. AndrewJ

    Oil and gas sales on public lands, 87k new IRS agents… is there anything at all worth celebrating in this bill that outweighs the harmful provisions?

    1. Michael Ismoe

      The Democrats think it’s just peachy. There must be enough confusing provisions in it to make political contributions more likely.

      If they think this is POS is “life changing” wait until the Republicans take over Congress.

      1. John Zelnicker

        Michael – Yes, it was defeated, it’s not fake news.

        However, since then Janet Yellen, Secretary of the Treasury has ordered the IRS not to change the rate of audits for taxpayers with earnings below $400,000.

        Although it may not be part of the legislation, the IRS has to do what their boss says. Ultimately the effect should be the same.

    2. John Zelnicker

      AndrewJ – The additional IRS agents are actually good news. (It’s both agents and customer service folks.) I’m a tax accountant and work with them on a regular basis.

      Congress has been defunding the IRS in real terms for the past 15 years and they are extremely short-staffed as well as using 20th century technology.

      The IRS is already hiring customer service reps and professionals to provide better service to taxpayers.

      In 2021 the IRS received approximately 100 million phone calls. Only 40% got through to a person, the rest were dropped or abandoned. At the end of 2021 there were 6 million paper tax returns that had not been processed and 10 million other pieces of correspondence, such as appeals and answers to IRS letters, that had not been processed.

      The IRS has been trying since the beginning of the century to better serve the taxpayer and they have succeeded, given the severe shortage of public-facing workers.

      IMNSHO, $80 billion is far too little.

  8. Adam1

    I’m starting to think the only reason the IRA got passed as it was mostly smoke and mirrors. I think I saw it here somewhere yesterday or the day before, but the $7,500 tax credit for electric vehicles also seems to be mostly bluster and not likely a reality given how it’s written.

  9. John Wright

    While the Democrats are touting the IRA, any pocketbook effects from it will be largely invisible to the voters in the mid-terms, so I expect it to be of little value to Democrats politically.

    I remember when Medicare Part D was passed during Bush II’s reign.

    This bill enshrined the “no negotiated drug prices for Medicare” into law.

    It was also a good way to buy elderly votes for the Republicans.

    CA Democratic senator Dianne Feinstein voted for the bill (along with with Ron Wyden of Oregon), stating that it while the bill had flaws that could be fixed later.

    54 votes was the “Yay” count and the 54 included these 11 Democrats (many Blue Dogs).

    Baucus (D-MT)
    Breaux (D-LA)
    Carper (D-DE)
    Conrad (D-ND)
    Dorgan (D-ND)
    Feinstein (D-CA)
    Landrieu (D-LA)
    Lincoln (D-AR)
    Miller (D-GA)
    Nelson (D-NE)
    Wyden (D-OR)

    Nine Republicans voted AGAINST the bill

    Chafee (R-RI)
    Ensign (R-NV)
    Graham (R-SC)
    Gregg (R-NH)
    Hagel (R-NE)
    Lott (R-MS)
    McCain (R-AZ)
    Nickles (R-OK)
    Sununu (R-NH)

  10. IM Doc

    Just yesterday afternoon, I had a 27 year old Type I Diabetic in my office for a visit. He was a college athlete before his diagnosis about 4 years ago. Perfectly healthy otherwise, and doing all he can to maintain his athletic abilities and physique. I have found over the years that with Type I diabetics, it is critically important for them to maintain a very low body fat and to be as athletic as they can possibly be. Unlike the Type II diabetic, they must take insulin and athleticism is the key to a longer and more healthy life.

    I will remind everyone that until about 10 years ago this patient’s monthly insulin bill would have maybe been 20 bucks.

    We noted his A1c today was 9.5 – it has gone up dramatically from the 6.2 it had been in May. I walked in the door and sat down and told him his A1c number. ( I well school my patients on every visit that we must maintain this below 6.5). This young man put his head into his hands and began to weep out loud. It turns out, he had not been able to afford the 800 dollar a month bill for his insulin that he was having to pay with his Obamacare insurance. Therefore, he cut his dose in half and has basically stopped eating more than a meal a day. The “Wal-mart” brands that are cheaper in our area have not been available reliably for several months. And yet even they are hideously expensive compared to what we had just a decade ago.

    I would like to say this is uncommon. It most definitely is not. I grieve with these people. This is yet another reason I will not be voting for Dems until the enema is complete. This bill is yet another slap in the face to all the young people out there with serious medical issues. How is it going to help them if MEDICARE PATIENTS are given a break on their meds? In 2026? We have an entire country of these young people who need help now. What a joke this party has become.

    And yet I am hearing from all the MSNBC viewers and our media that this “cheapo” approach is all REPUBLICAN obstruction? How can any non-moron say that – when the bill was passed 51-49 with ALL DEM VOTES? The people saying these kinds of things betray their stupidity for all to see.

    1. Old Jake

      IM Doc, I hope you don’t mind that I posted a link to this page, and directly quoted your remarks, on my FB (hide my face in my hands) account for all to see. I also commented this: “My grandfather Beasley was type I diabetic. He owned a farm in North Carolina, grew corn, cotton, soybeans, tobacco, and vegetables hogs and chickens for food. That farm provided food and the crops brought in some cash but probably just enough to stay running. He loved farming, and that was why he did it. If he had had to live in today’s world he would have died quickly.”

    2. Dave in Austin

      How about a coop factory to make insulin the old way with each “partner” getting paid in “non-medical grade” insulin? Or a boat from India selling the stuff in India and “delivering” a year’s supply at the old cost just outside the 12 mile limit- with the camera’s on the internet to watch the Feds raiding it “for our good”? I can think of much more radical methods but i don’t want to be arrested.

      1. Yves Smith Post author

        I know someone in Texas who tried a structure like that to provide not FDA approved treatments. Everyone joined what amounted to a medical self help associations. Texas AMA challenged him, he wrote what his basis of action would be v. them and they backed down pronto. I don’t know the details but he probably would have won and it would have blown a hole in the status of the ADA in Texas.

        Then they tried straight up prosecuting him for practicing medicine without a license. Trial in a two horse Texas town even though he lived in Dallas. Prosecution presented no evidence.

        He’s in prison for 4 1/2 years.

    3. Eclair

      Thank you, IM Doc. My daughter’s niece is Type I diabetic, diagnosed at age 5, probably due to a viral infection of her pancreas. She is still alive at age 21, due only to the availability of insulin. And to her parent having a very good job with excellent health ‘insurance.’ And two other family members, both males in their 50’s with Type 2 diabetes, are dead. Neither had good insurance and were known for cutting back or going off their insulin. The ‘deaths of despair’ syndrome.

      If the political overlords came right out and said: we are culling the herd by killing off those people with ‘defective’ genes or with susceptibility to infectious disease, or just the indignity of being surplus population, there would be mass uprisings (well, maybe.) Instead, they sneak up on us by increasing the cost and decreasing the availability of medicines and health care.

      But there is probably a growing suspicion among some groups that they are on the ‘hit list.’ During my recent stay in a pricy New Jersey suburb, know for its ‘diversity,’ I became aware that, among the people masking up at the grocery store, bank and other public spaces, close to one hundred percent were Black.

    4. Thomas Schmidt

      “The “Wal-mart” brands that are cheaper in our area have not been available reliably for several months. And yet even they are hideously expensive compared to what we had just a decade ago.”

      I would guess the production cost of most of these is pennies or a few dollars per vial, making the Wal-Mart brand at $25 sufficiently profitable to Wal-Mart. Unlike Lilly, they seem ok with this level of profit. Where does Wal-Mart fail to stock these?

      The prices for prescription insulins are ridiculous, even under ADA. Does your patient live close enough to drive to Canada or Mexico to obtain prescription insulin at a humane price? For entry to Canada a vaxx will be required, unless the Canadians agree that he can go in for medical reasons. It’s a nice place to visit in the hot summer and the savings can more than offset the trip cost.

      Thank you for helping your patient.

  11. responseTwo

    Thank you for including this article in your items. Parts of this will be a great summary to be sent to my house rep and senators, all democrats.

  12. Thomas Schmidt

    I really don’t like lying charts in articles whose message I fundamentally agree with. The cost of a vial of NPH insulin in the United States is about $25. At least, that’s what Wal-Mart charges for its branded version of NPH. Perhaps people not in the know pay retail? My understanding is that Wal-Mart is now selling its own version of Humalog for MUCHless than the $244 in the graphic.

    As the uncle of a Type 1 diabetic, I used to hate on Wal-Mart. Their actions to make this critical medication affordable for people like her and all lower income insulin-dependent diabetics has redeemed them in my eyes. Big Pharma is a bully, and it seems like it requires another too-big brawler to control them.

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