Tangle - The new prescription drug prices.

I’m Isaac Saul, and this is Tangle: an independent, nonpartisan, subscriber-supported politics newsletter that summarizes the best arguments from across the political spectrum on the news of the day — then “my take.”

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Today's read: 12 minutes.

I'm in Chicago.

I'm out at the DNC this week in Chicago. If you're here, drop me a line at isaac@readtangle.com.

On Friday, in our members-only post, I'm going to empty my notebook: Sharing what it's like on the inside, what I saw that you don't see on TV, and some reflections on how the week has gone. For now, check out this Instagram video where I break down six things that surprised me about Day 1; and subscribe to our YouTube channel for a longer breakdown coming later today.

Quick hits.

1. In a speech at the Democratic National Convention, President Joe Biden defended his legacy and promised Vice President Kamala Harris would continue the work he started in office. Hillary Clinton, Rep. Alexandria Ocasio-Cortez (NY), Jill Biden, Sen. Raphael Warnock (GA), and several others also spoke. Harris made a brief surprise appearance. (The recap)
2. A federal judge denied Hunter Biden's request to have his tax charges dismissed, all but ensuring his trial will proceed as scheduled next month. (The ruling)
3. The Republican-led House impeachment inquiry into President Biden ended yesterday, with House investigators accusing the president of “impeachable acts” but stopping short of recommending formal impeachment proceedings. (The report) 
4. Iran was behind the hack of the Trump presidential campaign, according to U.S. officials. (The assessment)
5. Former GOP Rep. George Santos pleaded guilty to two federal offenses for wire fraud and identity theft. He faces a minimum of two years in prison when he is sentenced on February 7. (The plea)

Today's topic.

Prescription drug prices. On Thursday, the Biden administration announced an agreement with drugmakers to reduce the prices of 10 of the most common prescription drugs covered under Medicare Part D. The agreement marks the first time the federal government has negotiated with pharmaceutical companies on drug prices, and the administration estimates the lower prices will save Medicare $6 billion when the deal goes into effect in 2026.

Reminder: Medicare is a federal health insurance program for people who are 65 and over. Medicare Part D helps cover the cost of prescription drugs. In 2022, the Inflation Reduction Act (IRA) authorized Medicare to negotiate drug prices directly with drugmakers, and in 2023, the Biden administration announced the first 10 drugs subject to price negotiations.

These are the drugs affected by the price negotiations and the percent decrease in the costs for a 30-day supply:

• Eliquis, a blood thinner from Bristol-Myers Squibb and Pfizer — 56%
• Enbrel, an arthritis drug from Amgen — 67%
• Entresto, a cardiovascular drug from Novartis — 53%
• Farxiga, a diabetes drug from AstraZeneca — 68%
• Fiasp and NovoLog, versions of a diabetes treatment from Novo Nordisk — 76%
• Imbruvica, a blood cancer drug from Johnson & Johnson and AbbVie — 38%
• Januvia, a diabetes drug from Merck & Co. — 79%
• Jardiance, a diabetes drug from Eli Lilly and Boehringer Ingelheim — 66%
• Stelara, a psoriasis drug from Johnson & Johnson — 66%
• Xarelto, a blood thinner from Johnson & Johnson — 62%

These figures reflect the price reduction relative to the full retail price of the medication and do not include any discounts or rebates the drug company may have offered. The Centers for Medicare & Medicaid Services (CMS) plans to select up to 15 more drugs covered under Part D for negotiation by February 1, 2025. 

Pharmaceutical companies have challenged the constitutionality of Medicare drug price negotiations under the IRA, arguing that the government is compelling drugmakers to agree against their First Amendment rights and is levying excessive fines for non-compliance against their Eighth Amendment rights. However, those challenges have so far failed, with federal courts rejecting the constitutionality arguments and finding that drugmakers are not compelled to sell to Medicare.

Drugmakers also warn that lowering the price of prescription drugs could stifle research into new treatments. A spokesperson for Novartis said the deal “will have long-lasting and devastating consequences for patients by limiting access to medicines now and in the future.” The Congressional Budget Office estimates the Medicare drug price negotiation program will result in 13 fewer new drugs coming to market in the next 30 years (out of a projected 1,300 new drugs).

Dr. Stacie Dusetzina, a professor of health policy at Vanderbilt’s School of Medicine, suggested the price cuts are not so great that they would meaningfully impact a company’s bottom line. “Companies are still going to be able to make profits and have incentives to innovate," Dusetzina said. 

Today, we’ll explore arguments about the first round of these negotiations, with views from the right and left. Then, my take.

What the right is saying.

• The right opposes the negotiations on principle, arguing they will lead to less medical innovation. 
• Some say the deal is in line with Harris’s support for price controls in other markets. 
• Others say Biden and Harris are concealing the downsides of the negotiations from voters. 

The Wall Street Journal editorial board said “drug price controls mean fewer cures.”

“A portent came last week from Charles River Laboratories, a top research contractor that helps drug makers with clinical trials. The company warned in its quarterly earnings report that pharmaceutical companies are slashing research and development owing to the IRA’s drug price controls,” the board wrote. “The IRA let Medicare ‘negotiate’ prices for 10 to 20 drugs a year and a total of 60 by 2029. Negotiate is a euphemism for extortion: Drug makers that don’t participate or reject the government’s price face a daily excise tax that starts at 186% and climbs to 1,900% of a drug’s daily revenue.”

“Normally, drug makers seek to launch medicines that have multiple potential indications in the market in which they can be developed fastest—often those for small populations and rare diseases since those trials don’t have to be as large,” the board said. “But the IRA encourages companies to develop medicines first for larger populations to maximize revenue before they become eligible for Medicare price controls—seven years after government approval for small-molecule drugs and 11 for biologics. This means that treatments for diseases affecting smaller populations may never be developed.”

In The Washington Examiner, Tom Price and Elaine Parker suggested the move foreshadows “more bad policy” in a prospective Harris administration.

“Beyond reshuffling the political horse race, a Harris-Walz administration wouldn’t change much. It would just mean more of the same bad Democratic policies. For healthcare, that spells fewer choices for patients and higher costs,” Price and Parker wrote. “Under Biden, the Department of Health and Human Services (HHS) is using the heavy hand of government to dictate prices of certain drugs accessed through Medicare. If Democrats win the White House for another term, hopes of undoing these government price controls will be dashed.

“The process of fixing prices and attempting to manipulate free market mechanisms is already having severe unintended consequences for seniors. Average Medicare Part D premiums are up 21% this year compared to 2023. And the ballooning out-of-pocket costs are expected to worsen as price controls go into full force over the next two years,” Price and Parker said. “Republicans have a much stronger track record… Republicans championed the expansion of association health plans, which make it easier for small businesses to band together to buy coverage for employees. The move provided extra bargaining power so Main Street could negotiate more favorable prices and terms such as those enjoyed by large corporations.”

In The New York Sun, Dean Karayanis called the negotiations “a prescription for pain.”

“The White House is touting a deal with pharmaceutical companies to shave $6 billion off Medicare costs by 2026, a move they say will save $1.5 billion for seniors. The headlines will score political points, but a less sunny prognosis is taking shape: More pain tomorrow for promises of relief today,” Karayanis wrote. “As the high of the announcement wears off, expect Ms. Harris to seek distance from this policy as she has so many of Mr. Biden’s initiatives. Price controls — the essence of the Medicare deal — may be popular in the short term, but they always have unintended consequences in the market.”

“While Mr. Biden criticized the ‘exorbitant’ profits of ‘Big Pharma,’ he ignored how that money funds the search for new cures and treatments. A life sciences firm, IQVIA, which tracks clinical research, found that companies had reduced spending on research and development by 22 percent since 2021,” Karayanis said. “Mr. Biden and Ms. Harris know that Medicare is popular and that pharmaceutical companies make easy targets. But seniors care little for political games. They’re about to get mauled by high costs, having been promised honey at election time by bears far better suited to selling snake oil.”

What the left is saying.

• The left praises the Biden administration for securing meaningful cost reductions for Medicare and its recipients.
• Some say Harris should tout the deal at every campaign stop.
• Others say the deal is just a small step toward addressing out-of-control healthcare costs.

In The Washington Post, Jennifer Rubin wrote about “Harris and Biden’s well-earned victory lap on drug prices.”

“If total job numbers and the drop in inflation fail to impress voters, touting more specific accomplishments might. Harris did just that on Thursday in an appearance with Biden in Maryland announcing the completion of Medicare negotiations with drug companies on the first 10 drugs designated for cost containment under the Inflation Reduction Act,” Rubin said. “While this accomplishment most directly helps older Americans, the benefits may be felt by a much wider segment of consumers. The administration hopes that now that these drug prices are public (and below current insurance rates), the new prices will put ‘downward pressure’ on the prices for all patients.

“Prescription drug prices are one element of a larger economic narrative for Harris. Going after businesses that take advantage of consumers appears to be one of her strongest issues, according to a detailed messaging survey of battleground voters from the Democratic polling firm Greenberg Research. It found that, in addition to abortion, the infrastructure plan and the prescription drug cost controls, Harris’s most popular issues include a ‘crack down on tax evasion by the wealthy and big corporations,’ instituting a 15% minimum tax and ‘going after greedy monopolies making super profits to lower prices and return money to consumers.’”

In The New Republic, Timothy Noah said Harris should talk about drug price reductions “in every speech.”

“Among other talking points, Harris can say that while Trump promises to lower drug prices… the Biden administration is actually doing it. The lowering of Medicare drug prices also helps Harris answer Trump’s lunge for the elderly vote by promising to eliminate taxes on Social Security,” Noah wrote. “Medicare price negotiation is a stunning legislative and administrative accomplishment… Credit for getting drug companies to negotiate Medicare discounts resides exclusively with Democrats, because not even one Republican member of Congress could bring themself to vote for the IRA.”

“Health care policy mustn’t be thought of as something distinct from economic policy; it pretty much is economic policy. That’s because high prices limit access to health care; because health care is the nation’s largest industry sector; and because, apart from the defense industry (which is much smaller), health care is the industry sector over which the federal government exercises the most control.” Noah said. “Negotiated Medicare drug prices should be a central point not only in Harris’s Friday speech on economic policy but in all her discussion of economic policy going forward.”

In The New York Times, Aaron E. Carroll asked if the deal marked “a $6 billion breakthrough or a drop in the bucket?”

“For years, the fight to control health care prices, perhaps the most significant factor in health care spending, has felt like an unwinnable battle, so it’s no small feat that Medicare is finally flexing its negotiating muscles. But it’s also a drop in the bucket,” Carroll wrote. “Six billion dollars isn’t chump change, and that number will surely grow as more drugs are added to the list for consideration… But it’s also a tiny component of the roughly $250 billion part D spends on drugs. It’s an even tinier part of the $4.5 trillion that the United States spent on health care in 2022 alone.

“In fact, it’s likely that a fair number of seniors won’t actually feel much of a change in their yearly out-of-pocket costs from these new prices. Many who buy these drugs, even after the reduction, would still hit the cap on out-of-pocket spending that Medicare part D allows,” Carroll said. “Fixing health care spending is anything but simple. If we reduce out-of-pocket payments, then premiums will go up… Only by lowering prices can overall spending decline, and that’s why it’s important that the government has now successfully done so, even in a small way.”

My take.

Reminder: "My take" is a section where I give myself space to share my own personal opinion. If you have feedback, criticism or compliments, don't unsubscribe. Write in by replying to this email, or leave a comment.

• Reducing Medicare costs is a huge win, and could signal that more steps to healthcare reform are coming.
• This change could potentially stifle innovation, pass on higher costs elsewhere, and cause knock-on effects.
• Ultimately, billions in savings for Medicare is a good thing, and that good outweighs the bad.

Yesterday, we talked about how Harris’s plan against price gouging addressed the wrong problem poorly. The negotiated Medicare prices are a complete 180: a real problem, and a real solution poised to benefit millions of Americans in 2026.

Both proposals involve the government basically setting prices, so why is this different? The price gouging ban would be the government setting a control for the entire market. Medicare drug negotiations, on the other hand, represent the government exercising its power as a consumer — albeit an enormous consumer. Rather than enforcing more restrictions on the market, Medicare negotiating drug prices actually removes a restriction that prevented the largest drug buyer from exercising its market power. This unleashes all the efficiencies of a free market: less regulation in purchasing, better free-market pricing, and increased competition among suppliers. 

Until the Inflation Reduction Act (IRA), the government was barred from negotiating prices directly under the terms of the 2003 Medicare Prescription Drug, Improvement, and Modernization Act; instead, “formularies approved by the government” have been handling negotiations. The IRA essentially cut out this middle man, and doing so has already resulted in huge price reductions, which is telling. The Wall Street Journal editorial board is correct that companies don’t really have much power in these negotiations with the government; I see granting negotiation power to the demand side’s biggest player as a good thing, but there is definitely a real risk of overreach when that player is the government. For now, pharma companies are still positioned to make handsome profits, even if their margins might now be slimmer. And the government has a huge incentive of its own to keep drugmakers profitable enough to continue developing new treatments. 

When President Biden announced price negotiations last year, we weren’t sure where to land — drug pricing is pretty complicated, and there are still a lot of things about our healthcare system that need to be reformed that drug negotiations won’t affect. So with that in mind, it’s only fair to go over all the ways this kind of reform falls short or could backfire:

• First, it doesn’t do anything about pharmacy benefit managers (PBMs), who negotiate drug prices on behalf of insurance providers, often winning large rebates from drug companies. However, PBMs often don’t pass those savings on to their clients, and 79% of the market is dominated by just three firms. Pundits on both sides are pushing to reform the system, and this plan doesn’t touch them at all.
• Second, this bill only allows Medicare to negotiate the prices of 10 drugs. So, insurance providers paying for expensive drugs to treat things like muscular dystrophy or melanoma, you’re out of luck (for now). And of those 10, four are overprescribed — an issue that this reform could end up exacerbating.
• Third, drug providers may have to look elsewhere to make up for this lost revenue. That could mean either cuts to research and development for future life-saving medicine, or higher prices for private insurance companies or other drugs outside these 10.
• Fourth, the government could just become a giant PBM. As the University of Michigan’s A. Mark Fendrick notes, “The private plans administering Part D benefits may move drugs that are selected for negotiation into a higher cost-sharing tier, even though Medicare itself will receive the lower negotiated price.” That means some of the out-of-pocket savings for patients could be much less than the government is projecting. 
• Fifth, Medicare Part D sponsors are required to cover just two medicines per therapeutic class, and they must cover the drugs that are part of the price negotiation program. So patients who are taking medication not covered by the negotiations may be forced to switch to drugs that are covered.

But at the end of the day, I’m getting more and more convinced that this kind of legislation will do more good than bad. 

For the shortfalls, it’s totally fine that this price negotiation doesn’t address PBMs. If there is actually bipartisan will to reform that system, then Congress should reform that system. And the government is already adding more drugs to the list, with CMS set to select 15 additional drugs for price negotiation by February.

As for the other issues, again, there’s nothing stopping the government from reacting to new problems as they come up. To me, the most concerning risk is the loss in R&D — but new research is tempering my concerns: Nonpartisan analysts at the Congressional Budget Office project the drug price negotiation program will reduce the number of new drugs coming to market by just 1% over the next 30 years. And something that I haven’t seen discussed is that severing the tie between Medicare costs and drug research might be a good thing: If the pharmaceutical industry is relying on inflated government payments to fund research, then cutting prices for drugs and (theoretically) opening up more government research grants would be an improvement to that system.

I think this is actually a pretty simple story: 10 very common medications just became more affordable for Medicare, which is likely to lower healthcare costs for millions of people, with billions in expected savings for both patients and the Medicare program as a whole. That’s a good thing. And while there’s more that the government could do to lower costs, and plenty of caveats and concerns to watch moving forward, I’m optimistic that this can be the next step of the much needed reforms that both sides agree are our healthcare system desperately needs.

Take the survey: What do you think of the Medicare negotiations? Let us know!

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Your questions, answered.

Q: Can you explain whether Tulsi Gabbard being put on the TSA watch list was done by Harris, or by the military officials she was criticizing? What is going on with this?  

— Karali from New Paltz, NY

Tangle: I can answer the first question pretty quickly: I have no idea why Tulsi Gabbard, the former Democratic representative from Hawaii and current independent, is on a TSA suspected terrorism watchlist. So far, the only details that I’ve found have come out of one whistleblower account published in Uncover DC, a right-leaning news blog. It seems to be a legitimate report — several representatives have come out to condemn Gabbard being placed on a watchlist, but the TSA has said it “does not confirm or deny” the reports.

What is going on? Well, the government is surveilling people who are suspected threats. You may have heard of the “No Fly List” and the “Terrorist Screening Center,” but Gabbard has allegedly been placed on a different terrorist watchlist you might not have heard of called “Quiet Skies,” which the TSA uses to identify international travelers who may require additional security. During her travel in July, Gabbard was subjected to enhanced screening processes and covert surveillance by Air Marshals at least eight times, according to Racket News. 

And Gabbard is not alone. The Boston Globe detailed the Quiet Skies program in a 2019 expose: “Travelers are not notified when they are placed on the watch list or have their activity and behavior monitored. Quiet Skies surveillance is an expansion of a long-running practice in which federal air marshals are assigned to surveil the subject of an open FBI terrorism investigation.” Little is known about the program’s operations, but The Globe did confirm that about 40 people are on the list, and that the Federal Air Marshal Service has “no information” on its effectiveness as a deterrent.

If you couldn’t tell, this is extremely distressing to me; subjecting citizens to stops without explanation sure sounds like a due process violation, and I’m highly suspicious of government overstepping its boundaries in the name of security. Last year, we published a piece on FBI entrapment. Last month, we published a reader essay about the ineffectiveness and high cost of surveillance. We don’t have details about why Gabbard was reportedly added to this list yet; but to me, that’s part of the issue. We don’t know what’s going on with this, and we should all be demanding answers.

Want to have a question answered in the newsletter? You can reply to this email (it goes straight to our inbox) or fill out this form.

Under the radar.

Ben Sasse, the former Republican senator from Nebraska, stepped down from his job as University of Florida president in July, just 17 months after he was hired. Sasse cited his wife's health as his reason for leaving, but he had also come under fire after tripling his office's annual spending (from $5.6 million to $17.3 million in his first year) while awarding lucrative contracts to big-name consulting firms and high-salaried remote positions to his former U.S. Senate staff and Republican officials. In one of a half-dozen similar examples, Sasse hired his former chief of staff Raymond Sass as UF's "vice president for innovation and partnerships" — a position that didn't previously exist — at a $396,000 salary. Sass worked the job remotely from Washington, D.C. The Independent Florida Alligator, the school newspaper, broke the story. 

Numbers.

• 67.3 million. The approximate number of people in the U.S. enrolled in Medicare, as of April 2024. 
• $3.9 billion. The estimated out-of-pocket spending in 2023 on the ten drugs covered in the price reduction agreement among Americans with Medicare Part D coverage, according to the Centers for Medicare & Medicaid Services. 
• $50 billion. The approximate Medicare Part D expenditures on the ten drugs covered in the price reduction agreement in 2023. 
• 38% to 79%. The range in price reductions among the ten drugs covered in the agreement. 
• $98.5 billion. The estimated Medicare savings over 10 years (2022-2031) from the drug negotiation provisions in the Inflation Reduction Act, according to the Congressional Budget Office. 
• 54 million. The approximate number of people with Medicare Part D coverage in 2023,  according to the Department of Health and Human Services.
• 9 million. The approximate number of Medicare recipients who used at least one of the ten drugs selected for price negotiation in 2023.
• 81%. The percentage of U.S. adults who said they supported the provision in the Inflation Reduction Act to authorize the federal government to negotiate the price of some prescription drugs for people with Medicare, according to an August 2023 KFF poll. 
• 36%. The percentage of registered voters who said they were aware of a federal law requiring the government to negotiate the price of prescription drugs covered by Medicare, according to a May 2024 KFF poll.

The extras.

• One year ago today we had just rerun an edition on agnosticism.
• The most clicked link in yesterday’s newsletter was the Supreme Court Title IX ruling.
• Nothing to do with politics: Images from around the world of the blue supermoon.
• Yesterday’s survey: 1,708 readers responded to our survey asking about a federal policy against price gouging with 80% opposed. “I support the thought but not implementation. Stopping price gouging is nice and good in thought. But don’t see the good effects in implementing it. Most grocery stores don’t mark up a lot and doing this could actually hurt a lot of sides,” one respondent said.

Have a nice day.

Heather Avis, known on Instagram by her handle @theluckyfewofficial, recently shared a video of a joyful moment: her 15-year old daughter, Macy, was invited to a birthday party. Macy, who is a high school freshman and has Down syndrome, was ecstatic as she showed the invitation to her mother. Heather wrote that the invitation “speaks to the common humanity that we all share. We all as humans want to feel like we belong. We all want to be wanted.” TODAY.com has the story.

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