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U.S. will allow drug makers to discuss Medicare drug price negotiations.

HBS Reporting

U.S. will allow drug makers to discuss Medicare drug price negotiations.

U.S. will allow drug makers to discuss Medicare drug price negotiations.

The U.S. government on Friday revised its guidance for its Medicare drug price negotiation process, allowing drug companies to publicly discuss the talks, but did not make major changes likely to convince drugmakers to end their suits seeking to halt the program.

The program was established under the Inflation Reduction Act (IRA), which President Joe Biden signed into law last year. It will for the first time allow Medicare, the government health insurance program for millions of Americans age 65 and older, to negotiate prices on prescription drugs, beginning with the ones on which it spends the most.

In September, the U.S. Centers for Medicare and Medicaid Services (CMS) will select 10 of the Medicare program’s costliest prescription medicines and negotiate price cuts to go into effect for 2026.

Merck & Co (MRK.N), Bristol Myers Squibb (BMY.N), the U.S. Chamber of Commerce and the leading industry lobby have filed separate suits against the U.S. government over the program, claiming it is unconstitutional.

The confidentiality provision included in the original guidance released in March was one issue raised with the program by the lawsuits, but not the only one. That guidance precluded drug makers from talking about the negotiations and required them to eventually destroy data received from CMS.

“We are doing everything that we can in implementation to make sure that this is a voluntary process for manufacturers to negotiate with us directly,” CMS Administrator Chiquita Brooks-LaSure said at a press conference.

Both Merck and Bristol Myers argue in their suits that the price negotiation would force drugmakers to sell their medicines to Medicare at huge discounts, below market rates. They assert this violates the Fifth Amendment, which requires the government to pay reasonable compensation for private property taken for public use. They also made First Amendment claims.

“We are reviewing the guidance, but it does not and cannot change the fundamental constitutional problems with the statute that Congress enacted,” Merck said in a statement.

Industry group the Pharmaceutical Research and Manufacturers of America (PhRMA) made an additional claim that the price negotiation program violates the U.S. Constitution’s Eight Amendment, which protects against excessive fines.

“The very few substantive changes to the final guidance demonstrate CMS saw this as a box checking exercise, not an opportunity to mitigate the negative impacts this price setting policy will have,” PhRMA said in a statement.

The Medicare agency also did not substantially change provisions that six industry sources told Reuters in May contradicted and unlawfully extended the IRA, including the bar set for whether a drug has competition.

The drugmakers “don’t want the government having any say in prices,” said Tahir Amin, an attorney and executive director of executive director of the Initiative for Medicines, Access & Knowledge (I-MAK), a consumer group that advocates for lower drug prices.

Amin said he does not personally find the drug industry’s legal arguments convincing. Still, if they’re able to get one of their suits in front of the current Supreme Court, “there’s a real possibility that they might at least strip away some of the aspects of the IRA.”

Americans pay more for prescription medicines than any other country. The Biden administration’s drug pricing reform aims to save $25 billion annually by 2031 through price negotiations for the drugs most costly to Medicare.

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