In July 2024, President Joe Biden published, with Senator Bernie Sanders, an editorial in USA Today denouncing “the scam” pharmaceutical companies. They pointed in particular to the prices of recent products from Novo Nordisk and Eli Lilly, in this case a molecule marketed, in one form, as an antidiabetic (Ozempic from Novo Nordisk and Mounjaro from Eli Lilly) and, in another, as a weight loss agent. (Wegovy for Novo Nordisk and Zepbound for Eli Lilly).
These products lead to sharply increasing expenses for Medicare, coverage for Americans over 65. According to a study by the Kaiser Family Foundation (KFF), one in 8 adults in the United States has taken Ozempic or a drug of the same type since their arrival on the market, starting in 2018.
In the United States, 10 million Americans use these drugs, the price of which is exorbitant. A box containing doses for a 4-week treatment costs around $1,000. Enough to bankrupt the American health system, according to Biden and Sanders. The latter estimate, in fact, that if half of adults suffering from obesity took Wegovy, it could cost more than 400 billion dollars per year, or more than what Americans spent on their entire drug purchases. prescribed in pharmacies in 2022.
The Economic Alternatives newsletter
Every Sunday at 5 p.m., our breakdown of the week's news
However, it would be possible to manufacture and sell these drugs much cheaper. A study carried out in March 2024 by Yale University showed that these new drugs could be marketed for a few dollars per month, even with a significant profit margin.
At the start of 2024, Biden and Sanders raised the situation with asthma treatments. While this respiratory disease, the most common in the United States, affects 27 million Americans (including 4 million children), the price of inhalers has found itself at the heart of a senatorial investigation. Often sold for several hundred dollars, the inhalers were, following this action, reduced to the ceiling price of $35.
Regulations
In recent years, tension has been growing in the United States over the price of medicines. It must be said that in 2023, more than 20% of adults said they had not followed a medical prescription because of its price, while 12% said they had cut pills in two or skipped doses for the same reasons.
In 2023, more than 20% of adults said they had not taken a medical prescription because of its price
Several measures were adopted under Joe Biden. In 2022, a new law on prescribed medicines, the “Maximum Fair Price” (MFP), was adopted and came into force. In particular, it establishes a capped expenditure on monthly insulin treatment for products covered by Medicare ($35) and the principle of price negotiation with drug producers.
As part of the “Maximum Fair Price” (MFP), ten drugs were selected for negotiations with manufacturers. The reduction in their prices must come into force on 1is January 2026. The prospect of tax sanctions is one of the negotiating levers. The Medicare health insurance program should make it possible to negotiate prices for around sixty drugs over the next four years, then for up to twenty more each year.
Price negotiations with manufacturers
Last March, four multinational pharmaceutical companies petitioned a New Jersey court, arguing that these negotiations, which strip them of their free ownership over drugs, are unconstitutional. A federal judge in Delaware, however, upheld the validity of the law requiring price negotiation with Medicare.
A small revolution is therefore underway in the American context. It was notably marked by the creation of “Obamacare”, whose official name is the Patient Protection and Affordable Care Act (PPACA). Promulgated in 2010, it made it possible to expand the population covered by Medicaid (public health insurance coverage for low-income or disabled people) and to increase individual health coverage by employers.
Faced with the pressure of lobby of the big pharmaceutical companies, to ensure the passage of the law, Obama had to give up the possibility for Medicare to negotiate prices globally at the federal level. This, while Medicare, which covers 61 million people, is the pharmaceutical industry's largest customer ($1,000 billion in medicines in 2023).
An intense battle with the lobbies
Alongside measures that target prices as such, a new legal framework was proposed at the end of 2023 by the Biden administration to be able, if necessary, to use patented inventions financed at least in part by public money. To do this, he relies on a provision called “March-in Rights” included in the Bayh-Dole law of 1980, but which has not been used so far.
The proposal aroused the most extreme reactions from large firms and all the actors they influence (chamber of commerce, law firms, politicians, or even university management), but it reflects the emergence of a need: to review the balance of forces between the particular interests of these firms and the general interest.
Along with actions at the federal level, states have begun to take steps to reduce drug prices
Along with actions at the federal level, states have also begun to take steps to reduce drug prices. In California, for example, a new law increased transparency requirements regarding prescription drug prices. In 2023, California has also committed to producing and distributing insulin for $30 per month, and is studying the possibility of manufacturing other essential drugs.
Joe Biden had made the issue of drug prices a campaign topic for the November presidential election, taken up by Kamala Harris. They denounced the fact that prices in the United States are among the most expensive in the world, often much higher than those in Europe, which are already totally excessive. We can already imagine European political leaders gnashing their teeth, fearing that American reductions will result in increases on the old continent.
But the the state in which is untenable. Why should an American pay $645 for an inhaler that sells for $49 in the UK? And why do we accept that an inhaler, an essential instrument for the survival of patients, is sold for 49 dollars when it costs 5 to produce…
Whether they are 10 times, 20 times or 100 times too expensive, the prices of these drugs are excessive relative to their cost of production, and they will remain so until government officials decide that it should be otherwise.
