Fourteen leading drugmakers spent billions more on stock buybacks and dividends than on research and development during the 2016-2020 period, House Democrats said Thursday in a report drafted to rally support behind a liberal plan to let Medicare negotiate down U.S. drug prices.
House Oversight Committee Chairwoman Carolyn Maloney said the companies spent $577 billion on investor benefits, or $56 billion more than its R&D outlay, even as the pharmaceutical industry argues a price-negotiation bill known as H.R. 3 would decimate their ability to develop new cures.
“This is simply not true,” the New York Democrat said of the industry’s claim. “The world’s leading drug companies have prioritized boosting payouts to investors and executives over funding meaningful prescription development.”
The report said four companies — AbbVie, Johnson & Johnson, Novo Nordisk and Amgen — spent more on buybacks and dividends than R&D in each of the past five years, while two, Pfizer and Novartis, spent more on investors than development for four out of the past five years.
Among the examined companies, only AstraZeneca and Roche spent more on R&D than on buybacks and dividends in every year from 2016 to 2020.
Ms. Maloney said drugmakers should rein in benefits for executives and investors to maintain development under a Democratic plan that, should it become law, would align prices with what other nations pay, slashing company revenues in the U.S.
“No one in this country should have to decide between putting dinner on the table and affording their medication,” Ms. Maloney said.
The House bill championed by Speaker Nancy Pelosi would allow the federal health secretary to seek lower prices for up to 250 prescription drugs, including insulin products, drawn from an ever-changing list of costly drugs without competition from at least one generic or bio-similar drug.
The negotiated price would be capped at 120% of the average international market prices paid in Canada, France, Germany, Japan and the United Kingdom. Negotiated prices would be extended to insurers that offer Medicare Part D plans but also commercial insurance carriers and group health plans — though those entities could negotiate other discounts.
Drug companies that refuse to participate in negotiations or won’t agree to a price face a noncompliance tax that starts at 65% of the gross sales of the drugs, increasing by 10 percentage points every quarter the manufacturer is out of compliance to a max of 95%.
Mrs. Pelosi is eyeing passage through a budget reconciliation bill that could get around a filibuster in the Senate, as Democrats sift through ways to pass their big-spending plans for families, or “human infrastructure,” without GOP votes in the divided upper chamber.
“We have been working on this for decades,” Mrs. Pelosi said of drug price negotiation, though she declined to detail a path forward on a conference call with reporters.
The pharmaceutical industry says H.R. 3 would upend a Part D program designed in 2003 to maximize choice for its 46 million beneficiaries compared to federal programs with stricter price controls and formularies, or lists of drugs that can be prescribed.
They say H.R. 3 looks more like extortion than “negotiation,” since the government would demand a certain price and then penalize companies that don’t play ball.
“While we can’t speak to specific examples cited in [Thursday’s] report, this partisan exercise is clearly designed to garner support for an extreme bill that will erode Medicare protections and access to treatments for seniors,” said the Pharmaceutical Research and Manufacturers of America, a major lobbying group.
“Every year, biopharmaceutical research companies invest tens of billions of dollars in the research and development of new cures and treatments, as well as our significant investments in time and resources creating treatments and vaccines to combat the global pandemic,” PhRMA said.
They said Congress should focus on the insurance side of costs, as patients struggle with high deductibles and other out-of-pocket costs.
As drugmakers adjust to less revenue under H.R. 3, it would result in eight fewer new drugs coming to the U.S. market in 10 years and up to 30 fewer new drugs over 20 years, the Congressional Budget Office said.
The pharmaceutical industry said the fallout would be wider and deeper than the CBO anticipates as companies are forced to swallow the health secretary’s price or leave the market.
They pointed to an analysis by the Trump administration’s Council of Economic Advisers, which estimated the bill would lead to as many as 100 fewer drugs entering the United States market over the next decade, or about one-third of the total number of new drugs expected during that time.
Democrats, meanwhile, say the bill will save taxpayer money that can be respent on Obamacare subsidies or other benefits.
The CBO in 2019 said that direct-negotiation aspects of H.R. 3 would decrease spending by $456 billion but, given new benefits placed in the legislation, there would only be $5 billion left over for deficit reduction or to use elsewhere in 2020-2029.
The bill was reintroduced in the current Congress but no longer includes big-ticket items like dental, vision and hearing benefits, so the leftover pot for other initiatives should be larger.
• Tom Howell Jr. can be reached at email@example.com.
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