Discussion of the pharmaceutical industry's rationale for unfettered prices

The Inflation Reduction Act has passed through Congress and Kaiser Health News discussed the provision in the legislation that will allow Medicare to negotiate some drug prices. Understandably, the pharmaceutical industry is keen to avoid any moves that can significantly reduce prices. Still, it is surprising to learn that the median list price for new drugs rose from $2,115 in 2008 to $180,007 in 2021, perhaps explaining an industry trade group's willingness to spend over $100 million in lobbying efforts this year. The article provides a nice overview of industry arguments against negotiations as well as some responses to those arguments.

The pharmaceutical industry argues that reducing profits will reduce the funding that will be available to invest into innovation. The article points out that this line of reasoning has been presented for a long time, but there have been several counter-examples to this reasoning. For example, the article discusses how drug companies initially expressed reluctance towards paying FDA fees to have drugs reviewed. The government agreed to set deadlines on the reviews, and drug approvals subsequently increased, despite the industry initially characterize the fees as a "tax on innovation." The article also discussed some patient groups actually opposing the ability for Medicare to negotiate prices for fear of reduced investment. Overall, the discussion is helpful to understanding the politics and compromises that went into this part of the legislation.