Democrats and Republicans both cite rising prescription drug costs as a key legislative priority, but they vehemently disagree on the extent of market regulation to achieve lower costs.

They're now clashing over new authorities granted to the secretary of the Department of Health and Human Services by President Joe Biden’s Inflation Reduction Act. HHS Secretary Xavier Becerra is the first in that position to be able to oversee Medicare's negotiation of drug prices with manufacturers. Medicare is the nation’s largest bulk purchaser of prescription drugs.

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In late August, the Centers for Medicare and Medicaid Services announced the first 10 drugs selected for the program. Prescription drug manufacturers have until the end of September to respond in order to initiate the negotiation process with CMS, a division of HHS. Final prices are set to take effect in 2026.

But congressional Republicans and industry leaders say too many details about the drug selection process have been kept hidden.

"We want greater transparency. That's the big issue in this whole pricing scheme right now," Rep. Virginia Foxx (R-NC), chairwoman of the House Committee on Education and the Workforce, told the Washington Examiner. She’s concerned that the secretive selection process will eventually influence the prices in the private and employer-funded healthcare system. "We need more transparency, along with less government control over what is happening in the marketplace."

Long-Running Battle
The ability of Medicare to negotiate prescription drug prices directly is part of a long-running political battle, which first became a rallying cry for Democrats during the presidency of Bill Clinton.

The Republican-controlled Congress in 2003, however, got the upper hand on the issue during President George W. Bush's administration by creating Medicare Part D, the prescription drug benefit for senior citizens and younger people with disabilities covered by Medicare. The Medicare Prescription Drug, Improvement, and Modernization Act prohibited the HHS secretary from negotiating Medicare prices or establishing a preferred drug list — provisions washed away when the Biden administration's Inflation Reduction Act came into effect.

Democrats praise the new Medicare negotiation program as a protection for seniors.

“Pharmaceutical companies will no longer be able to charge Medicare recipients unfair prices for the medications they need, and millions of Americans will see lower drug costs as a result," Sen. Bob Casey (D-PA), chairman of the Senate Committee on Aging, said in an Aug. 29 statement. "This is a huge step to lower drug costs for Americans, but it’s also just the beginning. More drugs will be added to the list in the years to come, and Democrats are going to keep fighting to lower everyday costs for Americans and ensure that families don’t have to choose between their health and their bank account.”

Lack of Transparency
The pharmaceutical industry has long decried Medicare negotiating drug prices as a system of federal price controls, and the current lack of transparency on the selection of eligible drugs only adds to their complaints.

The Inflation Reduction Act stipulates that only the most costly medications under Medicare Part D that do not have likely competitors can be chosen for the drug negotiation program. Yet several drugs chosen by CMS have generic alternatives that will probably be available before 2026, such as Janssen's Crohn's disease medication Stelara.

"We don't have any perspective into the decision-making process because Congress said it could all be exempt from the normal rulemaking process," Joel White, president of the Council for Affordable Health Coverage, told the Washington Examiner. New rules could be "kind of constructed in a dark back room somewhere."

CMS is not required to follow standard protocols regarding public notification and debate during the drug selection phase. In practice, White said this prevented pharmaceutical companies from dissenting during the selection process.

"Political decisions are being made by politicians and bureaucrats [that] have these incentives that are going to drive how we as Americans access healthcare," he said.

When asked about why the first round of medications on the CMS negotiation list was chosen, senior Biden administration officials told reporters that CMS followed the strict protocols set in the Inflation Reduction Act without further elaboration.

Not being able to mount a defense before selection is made worse by the stiff penalties on pharmaceutical companies that do not comply with CMS’s set price. If a manufacturer were to sell their product above the federal price for more than 270 days, the company could be subject to an excise tax of between 65% and 95% of the drug on top of a percentage of the sum of the drug's sales price.

"To quote The Godfather: 'It's an offer they can't refuse.' It's the price equivalent of waking up with a dead horse head in your bed," said ranking member of the Senate Health, Education, Labor, and Pensions Committee Bill Cassidy (R-LA) in a recent floor speech. "A negotiation in which a company, if they don't accept the government's offer, have to pay a 95% excise tax on profits is not a genuine negotiation."

Opportunity Cost of Lost Innovation
Opponents of the Medicare negotiations contend that the worst effect of the law will be the decline in research and development funds for new pharmaceuticals.

A University of Chicago study, for example, estimated that price controls would lower research and development investment by $663 billion through 2039, possibly leading as many as 135 new drugs not to come to market.

Foxx noted that the United States has the unique ability “to make lives better, improve the quality of life, and so much of that has to do with healthcare.”

John "CZ" Czwartacki, founder and chairman of Survivors For Solutions and who has the neurological disorder multiple sclerosis, told the Washington Examiner that the price control program "robs those who face the most cruel diseases of their hope."

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Czwartacki said that “the pipeline of treatments I needed wouldn’t have been available had the disincentives of the [Inflation Reduction Act] been in place then, I would have spent my life in a government nursing home instead of the happy and productive life I’ve had. Patients today deserve the same.”

“Those like me — who are battling diseases without a cure and require a plan B, C, and D to fight the disease — our chances to survive just got worse,” Czwartacki said.