Utah Congressional Delegation Criticizes the Inflation Reduction Act: 420,000 Elderly Face Drug Cost Cuts, Pharmaceutical Profits Plummet, New Drug Development Hit Hard!

Utah's congressional delegation has expressed strong opposition to a provision in the Inflation Reduction Act (IRA) that gives Medicare the power to negotiate prescription drug prices. The provision is intended to bring economic benefits to more than 427,600 seniors in Utah by reducing the cost of health insurance. Specifically, in the case of insulin, before the law was implemented, patients had to pay an average of $400 a month, and now it is capped at $35 a month. In addition, starting in January 2026, prices of drugs such as diabetes drugs Januvia and Farxiga, and Stelara for Crohn's disease, will also be significantly reduced, from $527 to $113, from $556 to $178, and from $13,836 to $4,695, respectively.

Notably, in 2003, the Medicare Prescription Drug, Improvement, and Modernization Act banned price negotiations in Medicare, a move that expanded the safety net for the elderly while giving drug companies the power to set prices that skyrocketed profits. According to a study in the Journal of the American Medical Association, from 2000 to 2018, the pharmaceutical industry achieved a total revenue of $11.5 trillion, gross profits reached $8.6 trillion, and its gross profit margin (profit to revenue ratio) was as high as 76.5%, far exceeding the average Standard & Poor's 500 index companies (37.4%).

In July, members of Utah's congressional delegation attended a hearing before the U.S. House Ways and Means Committee in Salt Lake City. BioUtah's CEO, Kelvyn Cullimore, testified at the meeting that the implementation of the IRA would have a significant inhibiting effect on R&D activity in the pharmaceutical sector. This view is supported by Better Care for Older People, which is calling on the public to write to their congressional representatives to express concerns that relevant provisions in the bill could harm the interests of seniors. They argue that the provisions inhibit the development of new drugs by hampering the pharmaceutical industry's ability to develop life-saving drugs and reduce the coverage of some health insurance programs.

Senator Mike Lee took the same position, warning that mandatory fixed prices for prescription drugs would ultimately endanger the health and longevity of Americans. However, the CBO's assessment shows that while the provision is expected to result in 13 fewer new drugs coming to market over the next three decades, there will still be 1,300 new drugs on the market overall. In addition, for Medicare Part D, the IRA will significantly reduce the out-of-pocket cap from $3,300 to $3,800 to $2,000 starting in 2025, which will undoubtedly greatly improve access to critical medicines for many patients with limited means.

Better Care for Older People's claims have been met with widespread scepticism. As an offshoot of Americans for Prosperity, the organization's core mission is to promote legislative and regulatory policies that contribute to the prosperity of the U.S. economy, including tax cuts, deficit reduction, and the preservation of free market principles. Americans for Prosperity, which advocates reducing the deficit by cutting spending rather than cutting corporate welfare, is backed by Koch Industries, a company known for promoting free-market causes.

There is nothing wrong with free-market principles, but there is nothing free about markets when one party is denied the right to negotiate freely with the other. In fact, a 2023 survey found that 93% of Democrats and 88% of Republicans support giving Medicare the ability to negotiate prescription drug prices.

The pharmaceutical industry is a highly concentrated field with significant barriers to entry, and its high profits are often derived from drugs that can transform patients' lives. However, high drug prices do little to reduce demand, because people's desire to survive and improve their quality of life makes them price-insensitive. According to Retireguide.com, two-thirds of personal bankruptcies stem from an inability to pay medical debt, and one in five of those bankruptcies can be attributed directly to the high cost of prescription drugs.

We strongly believe that the pharmaceutical industry should remain committed to the development and production of life-saving drugs. At the same time, giving Medicare the ability to negotiate drug prices will not impede future drug innovation and development. After all, patent protection and government intervention have long been integral to protecting innovation and drug development. Ultimately, what we need is a policy environment that both protects patients' drug rights and promotes the sustainable and healthy development of the pharmaceutical industry.