Drug Companies To Face Inflation Penalties For 'Jacked Up' Prices, Says Biden

Under President Joe Biden's Inflation Reduction Act (IRA), drug companies that price gouge may be required to pay rebates to Medicare, particularly focusing on those affecting over 750,000 seniors who rely on Medicare Part B drugs.

The rebates, effective in January, are expected to result in savings for seniors ranging from $1 to $2,786 per dose.

"President Biden’s prescription drug law cracks down on price gouging from Big Pharma, requiring companies to pay back Medicare if they raise prices on seniors at a higher rate than inflation," the White House said in a statement.

The 48 drugs identified by the administration fall under Medicare Part B, which covers drugs and vaccines administered in doctors' offices or hospital outpatient departments.

This marks the first time that pharmaceutical companies will be required to pay penalties for outpatient drug treatments.

The legislation's provision empowers Medicare to directly negotiate lower drug prices, caps insulin costs for beneficiaries at $35, makes recommended adult vaccines free, and requires pharmaceutical companies to pay rebates if they increase drug prices faster than inflation, the White House highlighted.

President Biden said big pharmaceutical companies "jacked up" prices nearly four times faster than the rise of inflation in the year before his IRA passed.

"They're ripping off Medicare. They're ripping off the American people," President Biden said in remarks at the National Institutes of Health. "We're going to save taxpayers money and discourage companies from raising prices in the first place."

President Biden expressed his concern over drug companies benefiting from taxpayer-funded research while charging U.S. taxpayers more than citizens in other parts of the world.

Drug companies will be put on notice if their medicines, developed with taxpayer funds, "are not made available to the public on reasonable terms, including based on price."

“It’s a good thing that leads to breakthroughs that save lives," President Biden said. "But drug companies benefit considerably from that research. They could not make their own drugs without the research done here."

The White House said that the prices of 64 drugs increased faster than inflation over the last four quarters.

Certain medications, such as Signifor, used to treat endocrine disorders, have seen continuous price hikes, and seniors taking Signifor could see savings of $311 per monthly dose starting in January, the White House highlighted.

Going forward, the Administration for Strategic Preparedness and Response (ASPR) will standardize fair pricing in contract negotiations for medical products developed or purchased, the White House announced.

Chiquita Brooks-LaSure, administrator for the Centers for Medicare and Medicaid Services, said the rebates are an important tool to "discourage excessive price increases" and protect Medicare beneficiaries.

The IRA, in addition to prescription drug rebates, also mandates Medicare to negotiate prices for some of the priciest Part D medications.

Democrats said that legislation aimed to reduce inflation, while critics argued it would make it worse.

The IRA also aimed to renegotiate Medicare drug prices and encourage "clean energy" consumer choices with tax credits. However, pharmaceutical companies have filed lawsuits to impede the implementation of the new negotiation standards.

It also aims to save $25 billion annually by 2031, compelling drugmakers to negotiate prices for selected expensive drugs with the U.S. Centers for Medicare and Medicaid Services, which oversees Medicare.

The IRA additionally sought to increase taxes on the wealthy.

An August poll revealed that 70 percent of Americans are not well-informed about the IRA, one year after the president signed it. The University of Maryland, in collaboration with The Washington Post, conducted the survey as part of gauging public awareness of the Biden administration's climate initiatives.