By Dave Rheaume Artist @

Pharmaceutical companies are sounding the alarm over new price controls on medicines. Bloomberg’s Ike Swetlitz and Angelica Peebles report:

Drugmakers say a new US law aimed at cutting prices on top-selling medicines after they’ve been on the market for several years has them stuck in limbo.

One after another, company executives at the JPMorgan Healthcare Conference in San Francisco cited the same problem: How do you figure out which drugs to invest in without knowing how much money they’ll make years down the road? Some say the uncertainty has had a chilling effect on deals, normally a hallmark of this conference and a sign of the industry’s buoyancy.

The focus of their consternation is the Inflation Reduction Act, President Joe Biden’s economic stimulus law that contains provisions aimed at reducing health-care costs in Medicare, the federal health program for older Americans. At various points through 2026, the law will allow the government to negotiate prices for some drugs, charge rebates to companies that increase prices faster than inflation and set a hard cap on patients’ out-of-pocket spending in Part D, Medicare’s outpatient prescription drug program.

At a kick-off conference reception held by Pharmaceutical Research and Manufacturers of America Sunday night, Novartis AG Chief Executive Officer Vas Narasimhan compared the passage of the IRA to landmark pieces of legislation that created the drug approval process, paved the way for low-cost generic medications, and changed the way Medicare pays for prescriptions.

“This year, the priority is going to be: How do we shape an IRA that will not punish innovation?” said Narasimhan, who’s also chair-elect of the lobbying group.

The drug industry has long been in the cross-hairs of the debate over health-care costs in America. In response, some companies have pulled back on the frequency of their price hikes, which were once customarily biannual.

The US is the only industrialized country that doesn’t control drug prices, and it’s by far the world’s biggest market for prescription medications at about $600 billion in 2021. Meanwhile, about 8% of Americans lack health insurance, and surveys show that millions of Americans — insured or not — say that they’re unable to pay for needed treatments their doctors have prescribed.

Drugmakers have argued that the focus on their prices is misplaced, as pharmaceuticals account for just about 12% of total US health care costs. And while branded drugs’ sticker prices continue to rise, net prices — the portion manufacturers actually receive after rebates and discounts — have declined on average over the past five years, according to analysis by the Drug Channels Institute. Still, repeated warnings that some new legislation will destroy the drug industry are starting to fall on deaf ears, said Nina Kjellson, a partner at venture-capital firm Canaan Partners.

“The industry has always cried wolf,” she said in an interview. “Like, if you change anything about this piece of legislation, whether it’s Medicare Advantage or it’s any type of broader universal health care coverage, everything, it’s going to decimate the industry.”

Even so, she said, the new legislation is structured in a way that could push drugmakers away from developing some new products.

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