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AMERICANS PAID $11 BILLION FOR DRUGS YOU CAN’T AFFORD  
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Helen Santoro
February 22, 2024
The Lever
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_ A bombshell report reveals that taxpayers spent billions developing
medicines that drugmakers say shouldn’t face Medicare price
negotiations. _

, Illustration by The Lever (AP Photo/LM Otero/Rick Bowmer)

 

As the government begins its first-ever price negotiations for a
handful of medicines under Medicare, the pharmaceutical industry has
launched an all-out legal
[[link removed]]
and PR [[link removed]] assault
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on this meager attempt to control out-of-control drug prices for the
country’s most vulnerable. Big Pharma reasons that the government
has no place
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setting prices for the drugs developed by private companies. 

But the government, and by extension taxpayers, heavily subsidizes the
development of drugs in this country. Now a bombshell new report
reveals that Americans funded the development of all 10 drugs up for
price negotiations, shelling out a total of $11.7 billion on their
research. In 2022 alone, Big Pharma made $70 billion selling those
same drugs — and now they want to keep their prices sky high.

According to the new study out of the Center for Integration of
Science and Industry at Bentley University, which has not yet been
published, the 10 selected prescription drugs
[[link removed]]
received anywhere from $227 million to $6.5 billion in funding from
the government’s National Institutes of Health (NIH) for crucial,
foundational research. 

“When the average taxpayer is paying for the drug, it’s not just
what’s being paid at the pharmacy,” said Fred Ledley, professor of
natural and applied sciences at Bentley and senior author on the
study. 

These drugs, which are covered by Medicare’s prescription drug
benefit plan, are taken by 7.7 million enrollees, most of them
elderly, to treat conditions including blood clots, heart failure,
diabetes, autoimmune conditions, and chronic kidney disease. In 2022,
Medicare patients spent $3.4 billion
[[link removed]]
out of pocket on these medications, a number that increased by 116
percent over a four-year span. 

From 2018 to 2022, out-of-pocket costs for Medicare enrollees climbed
for nine of the 10 drugs. The average annual out-of-pocket cost for
Stelara, an injectable drug that treats autoimmune conditions, rose
the most from $709 per enrollee to $2,058. For non-Medicare U.S.
patients, Stelara can be considerably more expensive, especially since
drugmakers charge far higher prices
[[link removed]] in this country
than they do elsewhere. A 2019 report
[[link removed]]
found that the regular price for Stelara was $16,600 per dose in the
United States, compared to $2,900 per dose in the United Kingdom. 

According to the new report from Bentley University, the Johnson &
Johnson subsidiary that developed Stelara received $6.5 billion in
taxpayer funding for it — by far the most of any of the medicines up
for price negotiations.

Total Medicare spending to pay for enrollees’ use of these vital
drugs more than doubled from about $20 billion in 2018 to $50.5
billion in 2023
[[link removed]].
Paying for these particular drugs accounted for roughly 20 percent of
all Medicare spending on prescription drugs between summer 2022 and
spring 2023.  

Pharmaceutical Research and Manufacturers of America (PhRMA), the
pharmaceutical industry’s main lobbying group, said it could not
comment on the specifics of a study it has not reviewed. 

Sarah Ryan, PhRMA’s senior manager of public affairs, added in an
email to _The Lever_ that “while the NIH plays a crucial role in
fostering basic research, private industry contributions, both
financial and technical, are instrumental in turning discoveries into
fully developed therapies for patients. There is a rich body of
research documenting the nature of these complementary roles, which
overwhelmingly demonstrates that the private sector invests
significantly more and takes on far greater risk in drug development
than the government.”

After finalizing negotiations with the drug manufacturers, the Centers
for Medicare and Medicaid Services, which oversees all federal health
programs, will publish the agreed-upon drug prices by Sept. 1, 2024,
and the new prices will go into effect starting Jan. 1, 2026.

As the government begins its first-ever price negotiations for a
handful of medicines under Medicare, the pharmaceutical industry has
launched an all-out legal
[[link removed]]
and PR [[link removed]] assault
[[link removed]]
on this meager attempt to control out-of-control drug prices for the
country’s most vulnerable. Big Pharma reasons that the government
has no place
[[link removed]]
setting prices for the drugs developed by private companies. 

But the government, and by extension taxpayers, heavily subsidizes the
development of drugs in this country. Now a bombshell new report
reveals that Americans funded the development of all 10 drugs up for
price negotiations, shelling out a total of $11.7 billion on their
research. In 2022 alone, Big Pharma made $70 billion selling those
same drugs — and now they want to keep their prices sky high.

According to the new study out of the Center for Integration of
Science and Industry at Bentley University, which has not yet been
published, the 10 selected prescription drugs
[[link removed]]
received anywhere from $227 million to $6.5 billion in funding from
the government’s National Institutes of Health (NIH) for crucial,
foundational research. 

“When the average taxpayer is paying for the drug, it’s not just
what’s being paid at the pharmacy,” said Fred Ledley, professor of
natural and applied sciences at Bentley and senior author on the
study.

These drugs, which are covered by Medicare’s prescription drug
benefit plan, are taken by 7.7 million enrollees, most of them
elderly, to treat conditions including blood clots, heart failure,
diabetes, autoimmune conditions, and chronic kidney disease. In 2022,
Medicare patients spent $3.4 billion
[[link removed]]
out of pocket on these medications, a number that increased by 116
percent over a four-year span. 

From 2018 to 2022, out-of-pocket costs for Medicare enrollees climbed
for nine of the 10 drugs. The average annual out-of-pocket cost for
Stelara, an injectable drug that treats autoimmune conditions, rose
the most from $709 per enrollee to $2,058. For non-Medicare U.S.
patients, Stelara can be considerably more expensive, especially since
drugmakers charge far higher prices
[[link removed]] in this country
than they do elsewhere. A 2019 report
[[link removed]]
found that the regular price for Stelara was $16,600 per dose in the
United States, compared to $2,900 per dose in the United Kingdom. 

According to the new report from Bentley University, the Johnson &
Johnson subsidiary that developed Stelara received $6.5 billion in
taxpayer funding for it — by far the most of any of the medicines up
for price negotiations.

Total Medicare spending to pay for enrollees’ use of these vital
drugs more than doubled from about $20 billion in 2018 to $50.5
billion in 2023
[[link removed]].
Paying for these particular drugs accounted for roughly 20 percent of
all Medicare spending on prescription drugs between summer 2022 and
spring 2023.  

Pharmaceutical Research and Manufacturers of America (PhRMA), the
pharmaceutical industry’s main lobbying group, said it could not
comment on the specifics of a study it has not reviewed. 

Sarah Ryan, PhRMA’s senior manager of public affairs, added in an
email to _The Lever_ that “while the NIH plays a crucial role in
fostering basic research, private industry contributions, both
financial and technical, are instrumental in turning discoveries into
fully developed therapies for patients. There is a rich body of
research documenting the nature of these complementary roles, which
overwhelmingly demonstrates that the private sector invests
significantly more and takes on far greater risk in drug development
than the government.”

After finalizing negotiations with the drug manufacturers, the Centers
for Medicare and Medicaid Services, which oversees all federal health
programs, will publish the agreed-upon drug prices by Sept. 1, 2024,
and the new prices will go into effect starting Jan. 1, 2026.

Essential Basic Research 

The rising cost of prescription drugs is a critical issue in American
health care. From 2008 to 2021, the launch prices of new drugs
increased by 20 percent per year
[[link removed]],
forcing 18 million Americans to skip essential dosages, according to a
2021 Gallup survey of adults nationwide
[[link removed]]. 

High prices are particularly harmful for lower-income households. Of
survey respondents earning less than $48,000 per year, 18 percent
reported they or someone in their home had skipped a dose to save
money. More than five million Medicare beneficiaries struggle to
afford their prescriptions, particularly those who do not receive a
low-income subsidy
[[link removed]] that
lowers out-of-pocket spending. Additionally, Black and Latino
enrollees report affordability problems at 1.5 to 2 times the rate of
their white counterparts
[[link removed]]. 

In prior years, the federal government didn’t have the power to
haggle with pharmaceutical manufacturers over Medicare drug prices.
But that changed thanks to the Inflation Reduction Act
[[link removed]], signed by
President Joe Biden [[link removed]] in
2022, which allowed Medicare drug-price negotiations and other
pharmaceutical cost-cutting measures. The legislation has already
capped out-of-pocket spending for insulin at $35 per month
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for Medicare beneficiaries. As Medicare expands its price negotiations
to cover 80 drugs by 2030, the act is estimated to save the government
$237 billion by 2031
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In the wake of the government announcing its starting-bid prices
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for the first 10 drugs up for negotiation, an analysis
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by the public policy advocacy group Center for American Progress
concluded the process could cut the drugs’ prices by as much as
$6,500 a month.

As pharmaceutical interests launched their offensive against these
price negotiations, a report published by the United States Department
of Health and Human Services
[[link removed]]
last December found that of the 10 drugs selected, seven received at
least one form of federal support as part of their research and
development. 

But the new report from the Center for Integration of Science and
Industry goes further, finding that all 10 drugs received funding from
the federal government. This is because while the government report
only focused on money going towards applied research, meaning efforts
to develop a particular drug, Ledley and his colleagues also looked at
funding for basic science — the key, foundational research that
identifies a biological target, like a protein or gene, that may be
linked to a disease and is the first step in drug development. 

“When most people look at what the government is paying for,
they’re only looking at the applied science,” said Ledley. 

Basic science is crucial in the development of transformative
medicine, according to a 2018 study
[[link removed]].
Researchers examined 28 significant medicines approved by the U.S.
Food and Drug Administration between 1985 and 2009 and found that 80
percent of them could be traced back to basic research that sought to
understand a biological process or disease. 

According to the Bentley University study, NIH funding on the 10
Medicare medic​​ations up for price negotiations ranged from $228
million to $6.5 billion per drug. Here’s the breakdown:

* Stelara, developed by Johnson & Johnson Innovative Medicine: $6.5
billion
* Enbrel, developed by Immunex Corporation: $2.6 billion
* Entresto, developed by Novartis: $901 million
* Eliquis, developed by Bristol-Myers Squibb and Pfizer: $791
million
* Xarelto, developed by Bayer and Johnson & Johnson Innovative
Medicine: $764 million
* Imbruvica, developed by Johnson & Johnson Innovative Medicine and
Pharmacyclics: $566 million
* Farxiga, developed by AstraZeneca and Bristol-Myers Squibb: $437
million
* Jardiance, developed by Boehringer Ingelheim and Eli Lilly and
Company: $434 million
* Januvia, developed by Merck: $228 million

The specifics of government funding going towards foundational
research for the final drug on the list — Novolog, which treats type
1 and type 2 diabetes — was not available because basic research on
insulin occurred decades ago. The NIH did report spending $4.5 million
on applied research for Novolog’s development. 

While most of the government subsidies went to basic science behind
these drugs, the NIH also spent more than $250 million on applied
research for these medicines, amounting to about half of the total
cost of bringing the drugs to market.  

This public funding saved the drug industry billions in research and
development costs. Now those drugs are making pharmaceutical companies
billions. In 2022 alone, the medicines netted their manufacturers more
than $70 billion in total revenue, according to a _Lever _analysis.
And some of these drugs have been on the market for 25 years.

“What makes the greed of the pharmaceutical industry so
reprehensible is the fact that the American people are paying twice
for some of the most expensive prescription drugs on the market: First
through their taxes and a second time at the pharmacy counter,” Sen.
Bernie Sanders (Ind.-Vt.) told the U.S. Senate Committee on Health,
Education, Labor & Pensions last year
[[link removed]].   

Ledley doesn’t agree with the “paying twice” idea, since he and
colleagues estimate the pharmaceutical industry is covering the
majority of costs during the applied research and development stage.
However, when it comes to drug pricing, “we think you have to
include this public funding for developing the drug in your
equation,” Ledley said.

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* Healthcare
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* corporate greed
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* Medicare
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