Report: Pharmaceutical industry has deployed an army of lawyers to prevent Medicare drug cost cuts

According to a new report by the watchdog group Accountable.US, manufacturers of the 10 drugs listed in the new Medicare price negotiation program exploited patent laws to keep costs high for patients.

The report comes nearly two years after President Joe Biden signed the Inflation Reduction Act, creating the historic Medicare Negotiating Program that allows the Department of Health and Human Services to negotiate directly with pharmaceutical companies to lower the prices of some of the most expensive but most commonly used prescription drugs.

“Despite spending billions of taxpayer dollars on drug development, these big pharmaceutical companies have deployed an army of patent attorneys to keep life-saving drugs exclusive and more expensive for seniors and other patients,” Tony Carrk, executive director of Accountable.US, said in a statement.

The original negotiating list included 10 drugs from Medicare Part D, which covers prescription drug costs. When Biden announced the list, companies scrambled to ensure their life-saving drugs remained “expensive and exclusive,” Carrk said at an Accountable.US press conference on Wednesday.

According to the report, the companies abused patent law to maintain their monopoly on certain drugs and prevent competitors from entering the market.

For example, Johnson & Johnson has entered into several confidential agreements to delay generic competition for its blood thinner Xarelto. In these so-called “pay-to-delay agreements,” a company pays its competitors money not to bring generic versions of their drug to market at a lower price. Johnson & Johnson has also filed nearly 50 patents on Xarelto, a tactic known as “patent thickening” that creates barriers to competitors developing a similar product.

The drug Imbruvica, which is used to treat cancers such as leukemia, is protected by nearly 150 patents, giving manufacturers Johnson & Johnson and AbbVie market exclusivity for the drug until 2036.

The companies also used a strategy called “evergreening,” in which they “make small, insignificant changes to their drugs to obtain new patents and thus extend their exclusivity,” the report said.

AstraZeneca's Farxiga is the drug with the longest shelf life on the Medicare negotiation list and is protected by 36 patents until 2030. Farxiga costs more than four times as much in the U.S. as it does in Canada or the U.K., two countries where the government can negotiate lower prices.

This tactic is part of an apparent strategy to raise drug prices ahead of negotiations with DHHS. Negotiated prices for the 10 drugs are scheduled to be released in September and take effect in 2026.

Spokespeople for AstraZeneca and Johnson & Johnson did not immediately respond to requests for comment.

“They are negotiated at a price that is affordable for patients but also allows for a lot of profit for the pharmaceutical industry,” said Merith Basey, executive director of Patients for Affordable Drugs, at the press conference on Wednesday. “But in the United States, as we have heard, the pharmaceutical industry is manipulating the loopholes in the system and extending patents well beyond their normal limits.”

According to a study by the Commonwealth Fund, the average price of the ten drugs on the Medicare negotiated list is three to eight times higher than the price of those drugs in Australia, Germany, France, the United Kingdom, Canada and Switzerland.

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The ability to negotiate Medicare “changes the trajectory of drug prices in the United States,” Basey said. Although price negotiations will likely have a larger impact in the long term, the IRA has already made a difference in the lives of Medicare Part D enrollees, despite efforts by some companies to avoid lower prices.

Jackie Trapp, who is treating her incurable blood cancer with Johnson & Johnson's drug Xarelto, said Wednesday she could not overstate the importance of the law for her life.

The IRA imposed a price cap on the drugs she had to pay out of pocket at $3,500 per year. Before the cap, her copayments for her medications cost her $15,000 to $22,000 per year. She and her husband had to sell their cars and refinance their homes to afford the drugs.

But the price of Xarelto and other brand-name drugs is still extremely high in the U.S. In 2022, one in five U.S. adults age 65 or older had to forgo or delay getting a prescription due to high drug costs.

“It is no exaggeration to say that these are life-and-death changes for people,” she said at the press conference.

Pharmaceutical companies have long argued that patents protect innovation and are necessary for continued research and development, but the report points out that much of the research for these drugs was funded by taxpayers, not the companies themselves.

According to a study by the Institute for New Economic, the federal government spent a total of $11.7 billion on basic and applied research that led to the development of these drugs. Of that, about $6.5 billion went into the development of Stelara, a drug from Johnson & Johnson used to treat Crohn's disease, arthritis and psoriasis.

“Pharma lobbyists and lawyers continue to insist that innovation relies on price gouging of seniors, even though the industry's investment in research and development is small compared to its spending on policy, lobbying and advertising,” Carrk said in a statement. “This is a stark reminder that the pharmaceutical industry will not put seniors and other patients above its profits without Medicare's historic new authority to regulate its greed.”