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The Biden administration unveils the first 10 medications up for price negotiation

A MARTÍNEZ, HOST:

About a quarter of adults in the U.S. say they have to take four or more prescription medications. That's according to Kaiser Health News. And many patients say they make tough sacrifices, such as giving up groceries to be able to pay for them. The Biden administration has picked 10 medications to start negotiating lower prices for Medicare patients, and it's overriding an argument from the pharmaceutical industry that reduced profits could shortchange their ability to research new treatments.

We're going to take a closer look with Mariana Socal. She's an associate scientist with the Johns Hopkins Bloomberg School of Public Health, and she teaches classes on how drug prices are set. Doctor, why do Americans pay so much more for prescription medications than anywhere else in the world?

MARIANA SOCAL: Well, we have a series of issues here on how our drug pricing system works, especially being the only country where drug manufacturers can really extend their patent lives for a long period of time. That's really what we're seeing with these drugs that have been selected for negotiation. They have been in our market for many, many years. And whereas, their prices in other countries go down, the prices here in the United States only go up.

MARTÍNEZ: So the mechanisms aren't in place here.

SOCAL: Exactly. What we rely on, it's called a market-based system for setting prices, which really means drug manufacturers can set whatever price they want, and the market has to respond to those prices. Sometimes payer will respond by somehow restricting access, such as through prior authorization, for example, or through higher and higher co-pays and cost shares. So in other occasions, when payers don't really restrict the access necessarily, patients then have to restrict because they cannot afford it. But manufacturers are free to set whatever price they want. The price negotiations that we have in place, they really depend on having generics entering the market, biosimilars entering the market. And sometimes this fails because patent terms, patent extensions can really prevent these competitors from entering our market.

MARTÍNEZ: Can generics, though, control prices, though?

SOCAL: Generics just offer therapeutic alternatives in the marketplace. And so payers can choose between a cheaper generic versus a more expensive branded if they so prefer. But without the generics, then those mechanisms fail. Then there is no other way to bring prices down.

MARTÍNEZ: All right. So when it comes to new drugs or drugs that are being worked on for the future, back in 2021, the House Oversight Committee found that the 14 biggest drug companies paid themselves and their investors billions more than they spent on research and development. And let's hear what Senator - U.S. Senator Amy Klobuchar told MORNING EDITION yesterday.

(SOUNDBITE OF ARCHIVED NPR BROADCAST)

AMY KLOBUCHAR: The profit margins of the big drug companies are almost three times the average profit margin of the other industries in this nation. People shouldn't let these big drug companies scare them. There's been tons of federal taxpayer money into the research. It's the taxpayers that are paying these outrageous prices that aren't charged in other countries.

MARTÍNEZ: Doctor, so how does this square with pharmaceutical companies such as Novartis saying that they're going to have to drop research and development because of lower drug prices?

SOCAL: See, the question here is that these are very, very old drugs. It is true that when a drug comes to market, the manufacturer needs to recoup what they invested in that drug and also pay for the new lines of development that they will open. But these drugs that have been selected for negotiation, they have been in the market for a long time. So that time is passing. You know, they have had their opportunity to recoup their investment. And like you mentioned and Senator Klobuchar mentioned, there are other places where drug manufacturers can choose to cut investment. Compensation is one, but there's also marketing and advertisement. There's another - you know, there's a series of other places where they can choose to cut investment and not on the new drugs that will allow them to have market share and to save lives in the future.

MARTÍNEZ: So are pharmaceutical companies lying or are they just playing the free market game?

SOCAL: I don't know the answer for that, but perhaps they're just trying to raise awareness of their investments, which I think it is very justified. You know, we all will need pharmaceuticals at some point in our lives, and pharmaceuticals can really, you know, provide, you know, incredible cures and improve the quality of life of many people, and we all need them. But the question is, you know, what exactly is at stake here? And importantly, these are very old drugs that have had their opportunity of recouping their investment on these drugs.

MARTÍNEZ: So could negotiations for prescriptions covered by Medicare maybe open the door to reduce drug prices across the board?

SOCAL: I think it's very important to mention that this is the very first time Americans will know how much the actual price of a drug is. This information is not available today. The way our market works, it's so opaque that what the actual price of a drug is, nobody really knows. So having that transparency will definitely help patients in plans even outside of Medicare to advocate and push for lower drug prices for them as well.

MARTÍNEZ: Mariana Socal at the Johns Hopkins Bloomberg School of Public Health. Doctor, thanks.

SOCAL: Thank you. Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

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