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Drugmakers fight back: Seeking to heat up middlemen market

  • Drugmakers deflect criticism onto middlemen
  • Congress demands answers on high U.S. drug prices
  • Executives point to rebates collected by intermediaries
  • 80% of Americans find drug prices unreasonable
  • Debate over balancing innovation and affordability

Introduction

On Capitol Hill, drugmakers faced harsh questioning from lawmakers regarding the skyrocketing cost of prescription drugs in the United States. The chief executives of Johnson & Johnson, Merck & Co., and Bristol Myers Squibb Co. were put on the spot, with Sen. Bernie Sanders and other committee members demanding answers as to why drug prices in the U.S. are significantly higher than those in other countries.

Drugmakers Blame Middlemen

During the hearing, the CEOs of the pharmaceutical companies attempted to shift the blame onto drug-market middlemen. They argued that intermediaries, such as pharmacy benefit managers, are driving up list prices for medications without passing on the savings to patients. The executives emphasized that these middlemen collect massive rebates and discounts on drugs, resulting in inflated prices for consumers.

Rebates and Discounts

The drugmakers revealed staggering figures related to rebates and discounts. Johnson & Johnson paid out $39 billion in rebates, discounts, and fees in 2022, amounting to almost 60% of the purchase price of its drugs. Bristol Myers Squibb paid out nearly $100 billion in rebates and discounts over the past five years, primarily linked to its blood thinner, Eliquis. Merck’s CEO highlighted that the net price of their diabetes drug, Januvia, is just a fraction of the list price, with the rest going to intermediaries.

Focus on Pharmacy Benefit Managers

The pharmaceutical executives urged Congress to take action against pharmacy benefit managers and other intermediaries. They suggested reforms that would delink the revenue streams of these middlemen from the price of medicines or require them to pass discounts provided by drugmakers directly to patients at the pharmacy counter. The executives argued that these changes would help lower drug prices and ensure that patients benefit from the discounts intended for them.

Public Outcry and Political Pressure

The high cost of prescription drugs has sparked public outrage, with over 80% of Americans considering drug prices unreasonable. Both Republicans and Democrats agree that there is a need for more government regulation to control prices. Narrowing the gap between U.S. and overseas drug prices has become a key talking point among politicians from both major parties.

The Most-Favored Nation Model

Former President Donald Trump proposed a “most-favored nation” drug-pricing model, which would have linked Medicare Part B drug prices to those paid overseas. This model aimed to prevent foreign countries from taking advantage of lower drug prices in the U.S. However, the Biden administration scrapped this plan. Critics argue that adopting European-style pricing policies would hinder innovation and reduce Americans’ access to newer drugs.

Conclusion

As drugmakers faced scrutiny on Capitol Hill, the focus shifted to the role of middlemen and the need for reforms in the pharmaceutical industry. The debate over high drug prices continues, with lawmakers, industry representatives, and the public pushing for solutions that balance innovation and affordability. It remains to be seen how Congress will address the issue and whether meaningful changes will be made to make prescription drugs more accessible and affordable for all Americans.

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