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PaperclipPerfector  1yr ago (text post)   28108 thread views

Culture War Roundup for the week of September 18, 2023

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After that Medicare basically gets to set the price; if companies refuse to negotiate / accept then they can be taxed on gross receipts starting at 65% and going up to 95%.

I don't follow this sort of thing closely, but I'm rather curious as to what this negotiation has to end up looking like. How does Medicare negotiate with a sole supplier unless they can threaten to not buy at all? Similarly, how do the pharmaceutical manufacturers negotiate for higher rates?

I'm having trouble picturing any negotiation that doesn't end up with one party declaring what the price will be, take it or leave it. Historically that's been the companies, I take it, but the new law seems like it'd just reverse the tables, but I don't really have a better alternative to recommend.

I'm having trouble picturing any negotiation that doesn't end up with one party declaring what the price will be, take it or leave it.

I think that's basically what it will be. Industries will have the chance to demonstrate whether X or Y price point will genuinely hurt their ability to recoup profits and there are factors CMS has to take into consideration, but I think ultimately they have to accept the government's number. The Kaiser Foundation's writeup has some more details on exactly what it'll look like:

The Inflation Reduction Act requires CMS to consider certain manufacturer-specific factors and information about therapeutic alternatives to selected drugs in negotiating the so-called “maximum fair price” for selected drugs, although the Act does not specify how CMS should weigh these different elements in the process of developing its offer for the maximum fair price.

The manufacturer-specific factors related to selected drugs include:

  • The manufacturer’s research and development costs and the extent to which the manufacturer has recouped these costs.
  • The current unit costs of production and distribution.
  • Federal financial support for novel therapeutic discovery and development related to the drug.
  • Data on pending and approved patent applications, exclusivities, and certain other applications and approvals.
  • Market data and revenue and sales volume data in the US.

...

The Inflation Reduction Act establishes an upper limit for the maximum fair price for a given drug. The upper limit is the lower of the drug’s enrollment-weighted negotiated price (net of all price concessions, including rebates) for a Part D drug, the average sales price for a Part B drug (which is the average price to all non-federal purchasers in the U.S, inclusive of rebates, other than rebates paid under the Medicaid program), or a percentage of a drug’s average non-federal average manufacturer price (non-FAMP) (which is the average price wholesalers pay manufacturers for drugs distributed to non-federal purchasers). This percentage of non-FAMP varies depending on the number of years that have elapsed since FDA approval or licensure: 75% for small-molecule drugs and vaccines more than 9 years but less than 12 years beyond approval; 65% for drugs between 12 and 16 years beyond approval or licensure; and 40% for drugs more than 16 years beyond approval or licensure. This approach means that the longer a drug has been on the market, the lower the ceiling on the maximum fair price.

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