Pharma falling off budget cliff

How the budget cliff, Trump and congressional Democrats are targeting biopharma

Three strong arms are lining up in Washington to take turns whacking the biopharma piñata. Divisions within the industry, a lack of new ideas, and resistance to change are making a bad situation worse for drug companies.

The first bat is synched to a clock that started ticking in 2018 when Congress passed a law that created a $126 billion budget hole in FY20. Congress will have to figure out how to fill that hole this spring.

At least one third of it will be filled with cash extracted from drug companies.

Trade associations and pharmas are scrambling to come up with proposals to meet congressional demands that could amount to $40 billion or more in government savings over a decade. If industry can’t deliver acceptable ideas for reducing spending on drugs, Congress will impose its own cost-cutting solutions.

HHS Secretary Alex Azar is wielding the second bat. He is determined to achieve visible drug price cuts that will provide relief to patients and political wins for President Donald Trump.

Industry is already in the middle of a battle with the Trump administration over a blueprint for reducing drug costs that would create an international reference pricing regime for many biologics and give insurers and PBMs more leverage over the prices of small molecules (see “Getting Serious”).

Democrats in the House have started swinging the third bat, a campaign to pass price control legislation.

This upcoming budget crisis is the result of a short-term fix to a self-inflicted wound.

While the House agenda’s most aggressive moves are unlikely to make it past Senate gatekeepers, measures that

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