Burcum: About that so-called ‘pill penalty’

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If two “End the Pill Penalty” flyers have reached my dusty rural mailbox, chances are many Minnesotans have received these Big Pharma-friendly missives, too.

The flyers almost got tossed with other junk mail. But I took a closer look because they seemed out of season, so to speak. The 2024 election ended months ago, and along with it the constant stream of mailings denigrating or canonizing candidates.

The pill penalty flyers look just like those election communications, with big bold headlines and breathless calls to action. The ones I received urged me to “Eliminate the Biden Pill Penalty.” A QR code conveniently takes you to a website where you can email your congressional representatives.

For those thinking about taking this step, please consider additional context before becoming an unwitting lobbyist for drug manufacturers. Ostensibly, the “end the pill penalty” campaign is about protecting the development of new medical treatments.

A more skeptical view: The pill penalty campaign is about protecting pharmaceutical profits from the federal government sensibly wielding its vast purchasing power to drive down drug costs through price negotiation.

The pill penalty campaign is also misguided and ill-timed. There’s a far more massive threat to medical breakthroughs right now: the sweeping research cuts and freezes put in place under President Donald Trump’s administration.

This “has brought biomedical research to the brink of crisis by holding up much of the $47 billion the United States spends on the field every year,” the New York Times reports. “The world’s leading medical labs can be found in the United States, and they rely on grants from the National Institutes of Health. The agency has stopped vetting future studies on cancer, Alzheimer’s, heart disease and other ailments.”

It is unclear when the money will reach the labs of the scientists in Minnesota and elsewhere. This foundational research paves the way for next-generation medical treatments. Where’s the bought-and-paid-for outrage over these chain-saw-style cuts?

The pill penalty mailers instead take issue with new measures adopted by the federal government to drive a hard bargain. The 2022 Inflation Reduction Act (IRA) includes provisions empowering “Medicare to negotiate directly with drug companies to improve access to some of the costliest single-source brand-name Medicare Part B and Part D drugs,” according to the federal Centers for Medicare and Medicaid Services (CMS).

Medicare is the federally run health insurance program mainly serving those age 65 and up. Enrollees top 68 million. The federal government also funds other health care programs. Understandably, “the federal government is the largest purchaser of prescription drugs in the United States,” reports the Congressional Budget Office.

The private sector famously wields its purchasing power to drive down prices for consumers, with Walmart a prime example. Employing the same strategy to reduce brand-name drug prices for seniors and others is reasonable, though like any health reform, there are always trade-offs.

The pill penalty campaign takes issue with the timing for when drugs become eligible for price negotiations. There are two main groups of drugs involved.

The first: small-molecule drugs, which are often pills or capsules and considered easier to manufacture. Ibuprofen is an example.

The second: biologics, which are more challenging to manufacture and typically used to treat more medically complicated, chronic or rare diseases, according to the Kaiser Permanente Institute for Health Policy. Humira, which treats rheumatoid arthritis and Crohn’s disease, is an example.

The two classes are given different time periods for legal protection from competition to protect drug manufacturers’ investment in developing them. Biologics receive 12 years, while small-molecule drugs are protected for five years under law.

The IRA drug negotiation provisions also treat the two drug classes differently when it comes to price negotiations. Biologics are exempt for 11 years, while small-molecule drugs get seven years.

The “pill penalty” campaign seeks to equalize the price negotiation exemption period between the two drug classes. A bill dubbed the EPIC Act, introduced by U.S. Sen. Thom Tillis, R-N.C., would lengthen the exemption for small-molecule drugs from seven years to 11 years, with the extended time period benefiting drugmakers’ bottom line. Cost of the “fix” is estimated at $10 billion.

An organization called Commitment to Seniors paid for the pill penalty flyers. It’s linked to American Commitment, headed by Phil Kerpen. He previously worked at Americans for Prosperity, a group “heavily financed by Koch Industries, which is owned largely by billionaire Charles Koch,” FactCheck.Org reports.

I asked PhRMA, the drugmakers’ trade organization, for a statement. It called the IRA’s price negotiation provisions “misguided” and said the uncertainty created by the law’s “flawed timeframe” is harmful to drug development.

A spokeswoman pointed to a new analysis concluding that “early-stage investment in small molecules has dropped nearly 70% since the IRA was introduced.” The analysis’ authors: Vital Transformation, which describes itself as a “small, unique consultancy focused on addressing the challenges of today’s modern healthcare system.”

Minnesota Sen. Tina Smith, a Democrat, took a different view. “Pharma is trying to undo all the progress we’ve made over the last few years to stop them from ripping off Americans. Seniors should know the truth about who is behind this campaign, and what’s at stake.”

As noted above, health reforms come with trade-offs. I’m not dismissing the investment deterrent PhRMA cites, but the EPIC Act legislation comes with its own cost trade-offs.

It’s also important to note that the IRA’s price negotiation protection period for small-molecule drugs is two years longer and thus more generous than the legal protections against competing products. Another critical point: Let’s not forget about seniors struggling to afford their medications. Should they be asked to wait four more years for more affordable drugs?

And if the IRA provisions are a threat to new drugs and treatments, consider again the bigger threat posed by massive research cuts. Where are the slick flyers protesting this? Because outrage is certainly in order.