Twinkle Tharwala
Staff Reporter (2024-2025)
In 2022, a vial of insulin cost $95.17 in the United States, over five times the cost in the next most expensive country.¹Americans are struggling to afford prescription drugs and are often forced to choose between paying for their medications or other essential needs.² In fact, over nine million adults in 2021 reported not taking prescription drugs, delaying refills, or reducing doses due to cost.³ Skipping or rationing needed medication is dangerous for patients, as it can worsen health conditions, increase hospitalizations, or even cause death.⁴
Why is Life-Saving Medicine in the United States Priced Far Higher Than Other Developed Countries?
Several factors affect the rising price of prescription drugs in the United States, including (1) improper Orange Book patent listings and (2) pharmacy benefit manager conduct.⁵
1. Improper Patent Listings in the Orange Book
In 1984, Congress enacted the Hatch-Waxman Act⁶ to strike a balance between protecting intellectual property rights⁷ of the branded drug industry and increasing generic drug availability.⁸ Under the Act, brand manufacturers need to submit patent information to the Food and Drug Administration (FDA).⁹ The FDA lists approved prescription drugs and corresponding patents in the Orange Book.¹⁰ To be eligible for listing in the Orange Book, a patent must claim a drug substance (e.g., active ingredient), a drug product (e.g., formulation), or a method of using a drug for which a patent infringement claim could reasonably be asserted.¹¹
Listing a patent in the Orange Book notifies a generic manufacturer that a brand manufacturer has patent rights for a drug.¹² To market a cheaper generic version of the branded drug, the generic manufacturer can file an application certifying that the patent has expired, is invalid, or will not be infringed by the generic version.¹³ In response to the generic drug application, the brand manufacturer can sue for patent infringement, automatically triggering a 30-month stay that prevents the FDA from approving the generic drug application.¹⁴ The stay is meant to allow both manufacturers to resolve patent litigation disputes, but brand manufacturers often take advantage of it by improperly listing ineligible patents in the Orange Book¹⁵ to block competing generic drugs.¹⁶
The FDA does not regulate Orange Book listings, relying on brand manufacturers to ensure accuracy.¹⁷ With limited oversight and accountability, brand manufacturers allegedly list patents improperly and rely on the 30-month stay to block generic drugs, regardless of patent validity or the Orange Book’s criteria.¹⁸ This delay in generic drug availability forces consumers needing immediate medication to pay inflated prices for a branded drug.¹⁹
2. Conduct of Pharmacy Benefit Managers (PBMs)
PBMs are intermediaries between drug manufacturers and consumers that negotiate drug prices and profit by artificially increasing prices.²⁰ Through complex and opaque business practices, PBMs update prices of drugs covered under insurance, which influence what patients pay out of pocket.²¹ Further, PBMs provide discounts to brand manufacturers, which prevent the entry of generic drugs into the market.²² The six largest PBMs, which manage 94% of prescription drug claims, are vertically integrated with players of the pharmaceutical supply chain.²³ Vertical integration means the same entity owns multiple stages of the same pharmaceutical supply chain, including PBMs, pharmacies, health insurers, health care providers, and drug private labelers.²⁴ The non-transparent conduct of PBMs and the system of vertical integration results in inflated drug prices.²⁵
What Will Help Reduce Prescription Drug Prices for Consumers?
1. Legal Action for Improper Patent Listings in the Orange Book
In September 2023, the Federal Trade Commission (FTC) issued a warning that pharmaceutical companies would face legal consequences for continued improper listings in the Orange Book.²⁶ Between November 2023 and April 2024, the FTC targeted 400 patents for being improperly listed in the Orange Book and sent warning letters to brand manufacturers.²⁷ The FTC’s continued crack down of improper listings may encourage generic manufacturers to challenge patents in court and force brand manufacturers to comply with the listing requirements.²⁸
2. Challenging PBM Conduct
The FTC intends to revive the Robinson-Patman Act (RPA), which serves to prevent price discrimination, to challenge PBM conduct.²⁹ The FTC plans to leverage the RPA to challenge conglomerates by potentially suing PBMs over insulin prices.³⁰ At a minimum, PBMs will likely be wary of the FTC’s heightened scrutiny of their conduct.³¹
3. Medicare Negotiating Drug Prices
President Biden’s Inflation Reduction Act of 2022 (IRA) authorizes the Department of Health and Human Services (HHS) to negotiate a “maximum fair price” with manufacturers for certain drugs under Medicare.³² If manufactures fail to comply with the government’s negotiation program, manufacturers risk losing substantial business due to government fines or being withdrawn from Medicare and Medicaid programs.³³ Rather than intermediaries (e.g., PBMs) negotiating drug prices, Medicare (administered by HHS) directly negotiating with manufacturers will help lower the price of certain drugs.³⁴ In response to the drug pricing provisions of the IRA, brand manufacturers are challenging the constitutionality of the government’s negotiation program.³⁵ So far, many courts have held in favor of the government.³⁶
Courts have rejected lawsuits challenging the constitutionality of the government’s negotiation program. In AstraZeneca Pharmaceuticals LP v. Becerra, the court rejected a pharmaceutical company’s argument that it had a right to sell drugs at prices above the “maximum fair price” under the Fifth Amendment’s Due Process Clause, which protects property interests.³⁷ The court reasoned that there is no “protected property interest” in selling drugs at prices that the government will not accept, as participation in Medicare and the negotiation program is voluntary.³⁸ However, the pharmaceutical company has appealed the court’s decision to the Third Circuit.³⁹
Further, in National Infusion Center Association v. Becerra, the court in the Western District of Texas dismissed a pharmaceutical lobbying group’s claims against the government.⁴⁰ In that case, the lobbying group asserted the negotiation program violated the nondelegation doctrine⁴¹(because Congress giving authority to HHS to negotiate drug prices is invalid), the Due Process Clause of the Fifth Amendment (as discussed in detail below), and the Excessive Fines Clause of the Eight Amendment.⁴² The merits of the claims were not evaluated because the district court dismissed the case⁴³ for lack of subject matter jurisdiction⁴⁴ and lack of venue.⁴⁵ Since the case was dismissed without prejudice,⁴⁶ the lobbying group appealed to the U.S. Court of Appeals for the Fifth Circuit.⁴⁷ The Fifth Circuit found that the district court has subject matter jurisdiction over the lobbying group’s claims.⁴⁸ Accordingly, the court reversed the dismissal and remanded⁴⁹ the case, directing the district court to evaluate the claims based on their merits.⁵⁰
Appellate decisions will be crucial in determining the legality of the negotiation program, and these cases may appear before the U.S. Supreme Court if Circuit Courts rule inconsistently. Regardless, Medicare negotiating drug prices is a step toward protecting consumers from inflated drug prices. Since January 2023, with the enactment of the IRA, insulin under Medicare has been capped at $35 per monthly prescription.⁵¹ Supporting pharmaceutical innovation and ensuring the availability of generic options should not be mutually exclusive. While many disputes have arisen over these recent policy changes, they could lead to more affordable prescription drug prices.
Sources:
[1] Andrew W. Mulcahy & Daniel Schwam, Comparing Insulin Prices in the United States to Other Countries, RAND 1, 38 (2024), https://www.rand.org/pubs/research_reports/RRA788-2.html.
[2] Laryssa Mykyta & Robin A. Cohen, Characteristics of Adults Aged 18–64 Who Did Not Take Medication as Prescribed to Reduce Costs: United States, 2021, CDC: NCHS Data Brief 1, 1 (2023), https://stacks.cdc.gov/view/cdc/127680.
[3] Id.
[4] Sherri Gordon, CDC Report: 9 Million Americans Not Taking Medications as Prescribed Due to Cost, health (May 18, 2024), https://www.health.com/drug-costs-united-states-cdc-7509659#citation-4.
[5] Kevin C. Adam et al., Three Drug Pricing Litigation Issues to Watch in the Second Half of 2024, White & Case (Aug. 6, 2024), https://www.whitecase.com/insight-alert/three-drug-pricing-litigation-issues-watch-second-half-2024.
[6] Drug Price Competition and Patent Term Restoration Act of 1984, Pub. L. No. 98-417, 98 Stat. 1585 (1984).
[7] Intellectual property rights of the branded drug industry include patents covering drug formulations (e.g., compositions), drug manufacturing processes, or medical uses of compounds. Chandra N. Saha & Sanjib Bhattacharya, Intellectual property rights: An overview and implications in pharmaceutical industry, Pubmed Central 88, 92 (Apr. 2011), https://pmc.ncbi.nlm.nih.gov/articles/PMC3217699/.
[8] Federal Trade Commission Statement Concerning Brand Drug Manufacturers’ Improper Listing of Patents in the Orange Book, Fed. Trade Comm’n 1, 2 (Sept. 14, 2023), https://www.ftc.gov/system/files/ftc_gov/pdf/p239900orangebookpolicystatement092023.pdf.
[9] Id.
[10] Id.
[11] 21 U.S.C. § 355(b)(1)(A)(viii).
[12] In re Restasis (Cyclosporine Ophthalmic Emulsion) Antitrust Litig., 333 F. Supp. 3d 135, 149 (E.D.N.Y. 2018).
[13] Federal Trade Commission, supra note 7, at 3.
[14] Id. at 4.
[15] Id.; Adam et al., supra note 5.
[16] Federal Trade Commission, supra note 7, at 3.
[17] Id.
[18] Id.
[19] Adam et al., supra note 5.
[20] Nicole Rapfogel, 5 Things To Know About Pharmacy Benefit Managers, Am. Progress (Mar. 13, 2024), https://www.americanprogress.org/article/5-things-to-know-about-pharmacy-benefit-managers/.
[21] Id.
[22] Pharmacy Benefit Managers: The Powerful Middlemen Inflating Drug Costs and Squeezing Main Street Pharmacies, Fed. Trade Comm’n 1, 38 (July 2024), https://www.ftc.gov/reports/pharmacy-benefit-managers-report.
[23] Id. at 5.
[24] Vincent Rajkumar, Why are prescription drug prices far higher in the US than other developed countries, OncoDaily (Aug. 26, 2024, 9:22 PM), https://oncodaily.com/blog/130999.
[25] Id.
[26] Federal Trade Commission, supra note 7, at 3.
[27] Adam et al., supra note 5.
[28] Id.
[29] Id.
[30] Id.
[31] Id.
[32] Nat'l Infusion Ctr. Ass'n v. Becerra, 716 F. Supp. 3d 478, 478 (W.D. Tex. 2024), rev'd and remanded, 116 F.4th 488 (5th Cir. 2024).
[34] Vincent Rajkumar, Predictably Big Pharma has gone to court to fight the limited ability of Medicare to negotiate prices, OncoDaily (Nov. 29, 2023, 5:40 PM), https://oncodaily.com/drugs/23082.
[35] Adam et al., supra note 5.
[36] Id.
[37] AstraZeneca Pharm. LP v. Becerra, No. CV 23-931-CFC, 2024 WL 895036, at *14–15 (D. Del. Mar. 1, 2024).
[38] Id. at *15.
[39] Adam et al., supra note 5.
[40] Becerra, 716 F. Supp 3d at 478.
[41] The nondelegation doctrine is a principle that limits Congress’s ability to delegate its legislative powers or lawmaking abilities to other entities, such as executive agencies, and delegation of legislative authority to an agency is valid as long as Congress provides an “intelligible principle.” Nondelegation doctrine, Black’s Law Dictionary (12th ed. 2024). Courts have not found any delegation to an agency invalid since the 1930s. ArtI.S1.5.3 Origin of Intelligible Principle Standard, Constitution Annotated (June 23, 2023),https://constitution.congress.gov/browse/essay/artI-S1-5-3/ALDE_00001317/.
[42] Becerra, 716 F. Supp 3d at 478.
[43] Id.
[44] Lack of subject matter jurisdiction means that the court has no legal authority to hear this case. Jurisdiction, Black’s Law Dictionary (12th ed. 2024).
[45] Here, lack of venue means that the Western District of Texas is not related to the case or the parties involved, and thus is not a proper location for hearing this case. Venue, Black’s Law Dictionary (12th ed. 2024).
[46] When a court dismisses a case without prejudice, a plaintiff can refile the case later in a new lawsuit. Dismissed without prejudice, Black’s Law Dictionary (12th ed. 2024).
[47] Nat'l Infusion Ctr. Ass'n v. Becerra, 116 F.4th 488, 488 (5th Cir. 2024).
[48] Id. at 509.
[49] When a court remands a case, the court sends the case back to a lower court for reconsideration or further action. Remand, Black’s Law Dictionary (12th ed. 2024).
[50] Becerra, 116 F.4th at 509.
[51] Bisma A. Sayed et al., Insulin Affordability and the Inflation Reduction Act: Medicare Beneficiary Savings by State and Demographics, ASPE 1, 2 (Jan. 24, 2023), https://aspe.hhs.gov/reports/insulin-affordability-ira-data-point.
