Big Pharma Sues to Block Drug Price Negotiations

Plus: Powell previews more rate hikes ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ [The Fisc](   By Yuval Rosenberg and Michael Rainey Happy Wednesday! It’s the [longest day]( of the year, so we hope you’re having a good one. (iStockphoto) Drug Industry Trade Group Sues to Block Medicare Price Negotiations The pharmaceutical industry’s top lobbying group filed a lawsuit Wednesday arguing that a law enacted last year allowing Medicare to directly negotiate some prescription drug prices is unconstitutional. The Pharmaceutical Research and Manufacturers of America (PhRMA) was joined by the National Infusion Center Association and the Global Colon Cancer Association in filing the suit in the U.S. District Court for the Western District of Texas. The filing is the fourth seeking to block the Medicare price negotiations, following similar suits in recent weeks from Merck, Bristol Myers Squibb and the U.S. Chamber of Commerce. The new lawsuit claims that the Inflation Reduction Act, passed by Democrats and signed into law by President Joe Biden last year, violates the constitutional separation of powers and drugmakers’ due process rights as well as the Eighth Amendment’s protection against excessive fines. The suit also claims that the new drug-pricing program “will harm patients, caregivers, physicians, and the broader public interest in pharmaceutical innovation. It will distort the marketplace, inhibit the development of critical new drugs, and disrupt access to needed treatments.” PhRMA President and CEO Stephen Ubl echoed previous drug industry complaints that the new structure for Medicare negotiations is a sham that seeks to force industry compliance with what amounts to government-mandated pricing. The Biden administration has defended the Inflation Reduction Act and said it is confident the law will be upheld in the courts. Health and Human Services Secretary Xavier Becerra earlier this month responded to the Merck lawsuit by saying “the law is on our side.” And White House Press Secretary Karine Jean-Pierre said at the time: “There is nothing in the Constitution that prevents Medicare from negotiating lower drug prices.” Legal experts have largely sided with the administration. The first 10 drugs to be subject to price negotiations will be chosen in September, with new pricing due to take effect in 2026. The Congressional Budget Office has estimated that the new drug price negotiations will save Medicare about $100 billion over 10 years. Quotes of the Day: A Long Strange Trip for Rates? “Inflation pressures continue to run high, and the process of getting inflation back down to 2 percent has a long way to go.” — Federal Reserve Chair Jay Powell, giving his semiannual monetary policy [report]( to the House Committee on Financial Services Wednesday. Powell offered a mixed picture of the economy, saying that while growth has slowed, the labor market remains “very tight,” even as supply and demand seem to be coming back into balance, dampening wage pressure. “We have been seeing the effects of our policy tightening on demand in the most interest-rate-sensitive sectors of the economy,” Powell said in his prepared remarks, citing housing and business investment. “It will take time, however, for the full effects of monetary restraint to be realized, especially on inflation.” Given those conditions, more interest rates are likely ahead. “Nearly all FOMC participants expect that it will be appropriate to raise interest rates somewhat further by the end of the year,” Powell said, adding that future increases may come at “a more moderate pace” than previously, when the central bank raised rates at 10 meetings in a row. He also told lawmakers that it is “a pretty good guess” that officials would raise rates two more times, by 50 basis points in total, as indicated by the economic projections made at the most recent meeting of the Federal Open Market Committee. “It was terrific. What can I say? It was great.” — also Fed chief Jay Powell, responding to a question from Rep. Wiley Nickel, a Democrat from North Carolina, about his attendance at a Dead & Company concert in Bristow, Virginia, earlier this month. “I’ve been a Grateful Dead fan for 50 years,” Powell said, confirming once and for all that the Fed head is a Deadhead. Another $6.2 Billion in Aid for Ukraine as Pentagon Corrects Accounting Errors The Defense Department announced last month that improper accounting methods led it to overvalue some of the military aid provided to Ukraine by roughly $3 billion, and now it’s more than doubling that estimate to $6.2 billion. That means that the Pentagon can send more aid to the war-torn country than defense officials originally thought. The problem stems from how older equipment has been valued. Originally, the Pentagon used replacement values, or how much it would cost to replace equipment with new material. Instead, officials say they should have used net book value, which is lower to reflect the age and reduced life expectancy of older equipment. As a result of the accounting change, the $6.2 billion in overvaluation is now available to use for additional equipment and supplies. “It’s just going to go back into the pot of money that we have allocated” for the future shipments to Ukraine, Pentagon spokesperson Sabrina Singh [told]( the Associated Press. The U.S. has provided more than $40 billion in military to Ukraine since the Russian invasion early last year. The accounting corrections will not alter the total dollar value of aid provided to Ukraine, but will result in a greater quantity of military equipment being sent. Number of the Day: $25 Billion Some 2.4 million refugees in a new analysis by the American Immigration Council paid about $25 billion in taxes in 2019, including $16.2 billion in federal taxes and $8.7 billion in tax payments to state and local governments. The study, released Tuesday to mark World Refugee Day, used Census data for 2015 to 2019 and identified likely refugees based on the year people arrived in the United States and their country of birth. “Refugees pay tens of billions of dollars in taxes each year,” the [report]( says. “And in a country where immigrants have long been known to be more likely than the U.S.-born to start businesses, refugees show a particular willingness to make such long-term investments in the country. They found companies, become U.S. citizens, and buy homes at notably high rates.” Read more about the study at [The Hill](. --------------------------------------------------------------- Send your feedback to yrosenberg@thefiscaltimes.com. And please encourage your friends to [sign up here]( for their own copy of this newsletter. --------------------------------------------------------------- Fiscal News Roundup - [Powell Expects More Fed Rate Hikes Ahead as Inflation Fight ‘Has a Long Way to Go’]( – CNBC - [Drugmaker Industry Group Sues to Stop Medicare Drug Price Negotiation]( – CNN - [NDAA Is a Culture War Battlefield]( – Politico - [U.S. Can Send More Aid to Ukraine Thanks to $6.2 Billion Accounting Error]( – Washington Post - [Child Care Disruptions Expected as Record Funding Nears an End]( – New York Times - [Student Loan Pause Is Ending, With Consequences for Economy]( – New York Times - [Partisan Divide on Student Loan Solutions About to Get Louder]( – The Hill - [White House Meets With Drug Firms on Cost of Overdose-Reversal Drugs]( – Washington Post - [ProPublica Asked About Alito’s Travel. 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