WASHINGTON — Critics of the climate change, health and tax law enacted this week have seized on a provision addressing high drug prices to make inaccurate claims.
The law fulfilled a long-held goal of Democrats: to empower the federal government to barter drug prices for Medicare patients. That has come at a price to Medicare and innovation, some Republican lawmakers and members of the pharmaceutical industry contend.
Here’s a fact check of their claims.
What Was Said
That is misleading. The law empowers Medicare to barter prices for prescribed drugs, leading to savings for the federal government. However the law doesn’t cut advantages, as Mr. Scott’s Twitter post may imply. Quite the opposite, many Medicare enrollees will see their advantages improve.
“No provision within the I.R.A. directly reduces advantages for Medicare enrollees, and a number of other increase advantages,” said Rachel Sachs, a law professor at Washington University in St. Louis and an authority in drug regulation. “The goal of the Medicare drug price negotiation provision will not be to scale back advantages for enrollees: It’s to pay less for a similar drugs that we’re currently purchasing, in doing so saving money.”
The law also includes numerous cost-saving measures for Medicare beneficiaries. It limits to $2,000 the quantity enrollees would must pay out of pocket for medication, caps monthly costs for insulin at $35, eliminates cost sharing for vaccines and expands eligibility for low-income subsidies. The Kaiser Family Foundation estimated that these provisions could reduce costs for greater than 4 million older Americans.
The Congressional Budget Office projected in July that an earlier version of the drug price laws would cut back the federal deficit by $288 billion over 10 years — what Mr. Scott was referring to.
About $102 billion of that reduction in spending comes from the federal government’s negotiating and paying manufacturers lower drug prices.
One other provision requires manufacturers to rebate Medicare in the event that they raise drug prices at rates higher than inflation. The budget office estimated that this could save the federal government about $62 billion over a decade. (Those savings are more likely to be smaller because the finished law was more limited in scope after a top Senate official ruled that the rebate couldn’t take note of medications sold within the private market.)
One other $122 billion in spending reduction comes from the repeal of a Trump-era rule on drug pricing that will most certainly have had mixed effects for Medicare beneficiaries. But that regulation has been repeatedly delayed and was not scheduled to take effect until 2027 — leading some to characterize the rule’s repeated inclusion in laws as a budgetary gimmick. Moreover, the ultimate law didn’t repeal it entirely but relatively pushed enactment to 2032. In other words, about 40 percent of the “cuts” to Medicare that Mr. Scott cited check with further delaying a regulation that has never been enforced and has had no effect on beneficiaries.
What Was Said
“C.B.O. and the University of Chicago have each found that a whole lot of cures won’t ever come to market under the laws before us today.”
— Representative Tom Cole, Republican of Oklahoma, in a congressional hearing in August
That is misleading. Many Republican lawmakers have cited a working paper written by economists on the University of Chicago to say that the drug negotiation provisions within the law will cause the lack of a whole lot of medicines over the following three a long time. But that research estimated the effect of drug pricing laws that’s more expansive than the Inflation Reduction Act. The budget office has also projected a much smaller impact on drug development.
The paper estimated that under a 2019 House bill on drug pricing, the pharmaceutical industry would cut back its spending on research and development by 29 to 60 percent from 2021 to 2039, “which translates into 167 to 342 fewer latest drug approvals during that period.” The budget office, for its part, had estimated a more muted effect of 38 fewer drugs over 20 years.
The 2019 House bill would have enabled the federal government to barter the costs of as much as 250 commonly used drugs and required the manufacturers to supply the identical prices to non-public insurers. Under current law, the federal government will give you the option to barter the costs of as much as 60 drugs by 2029.
In an updated evaluation, the authors of the working paper estimated that an earlier version of the present law would cut back drug development spending by 18.5 percent and end in 135 fewer drugs through 2039. That can be way over the budget office’s estimate of five fewer drugs over 20 years under that initial version and seven fewer drugs under the present law.
Discrepancies between the 2 models may be attributed to a number of aspects. The budget office’s model, for instance, takes under consideration a rise in demand for drugs as prices decrease and Medicare advantages are expanded, said Rena Conti, a health economist on the Questrom School of Business at Boston University.
While it’s plausible that the law will reduce spending on research and development, experts said that claims that it will drastically impair the industry’s ability to provide latest, lifesaving treatments were hyperbolic.
That’s because a overwhelming majority of recent products approved by the Food and Drug Administration aren’t breakthroughs, but relatively latest iterations of existing products. The law also specifies that Medicare can negotiate prices for drugs that cost this system a big sum of money and have been available on the market for at the least nine years. Under this narrow criteria, breakthrough medications, which usually treat rare diseases, would simply not be regarded as candidates for negotiation because they’re each latest and affect small population sizes.
“It’s intended to deal with long-lived drugs that ought to have gone generic or gone biosimilar anyway, and for whatever reason haven’t,” Professor Conti said. “The drugs which might be there are producing significant spending within the Medicare population.”
Professor Sachs also pointed to remarks in 2018 by Alex M. Azar, a former pharmaceutical executive and President Donald J. Trump’s health and human services secretary. The industry issued similar warnings that drug price controls the Trump administration had proposed that 12 months would result in an enormous loss in innovation. In a speech that September, Mr. Azar called such talking points “drained” and “mathematically unbelievable.”