Sen. Elizabeth Warren (D-Mass.) is back at it again, teaming up with Rep. Jan Schakowsky (D-Ill.) to introduce a new bill that’s sure to make Big Pharma squirm. Their proposed legislation, dubbed the “Medical Innovation Act,” aims at large pharmaceutical companies that have been caught breaking federal laws. The twist? Instead of just giving these corporate giants a stern talking-to and letting them slink away, the bill forces them to cough up some of their profits to help fund federal health agencies.
Here’s how it works: If you’re a drugmaker caught with your hand in the cookie jar—and by “cookie jar,” we mean you’ve violated federal laws and benefited from government funding to develop your wildly successful drugs—you’re going to have to pay up. The bill targets those “blockbuster” drugs that made at least $1 billion in sales in the previous year. So, we’re talking about the big dogs here.
Where’s all this money going, you ask? The funds go straight into the coffers of the National Institutes of Health (NIH) and the Food and Drug Administration (FDA). These agencies could definitely use a financial boost to keep developing lifesaving treatments and funding cutting-edge medical research. And thanks to Warren and Schakowsky, pharmaceutical companies that settle with the government will have to invest a slice of their profits into these very causes—for a whole five years.
Several prominent pharmaceutical companies are currently facing legal repercussions due to controversial actions. Notably, Teva Pharmaceuticals USA Inc. and Teva Neuroscience Inc. (collectively referred to as Teva) have agreed to pay $450 million in response to allegations of violating the Anti-Kickback Statute (AKS) and the False Claims Act (FCA). Three other generic drug manufacturers—Taro Pharmaceuticals USA Inc., Sandoz Inc., and Apotex Corporation—have reached a settlement totaling $447.2 million over accusations that they conspired to fix the prices of various generic medications.
Under the new Medical Innovation Act, companies like Teva, Taro, Sandoz, and Apotex could face significant financial penalties beyond their current settlements if they check all the boxes under the proposed act.
According to Warren’s office, a whopping 40 pharmaceutical companies have settled with the Justice Department over the past five years. In Warren’s own words, “Big Pharma shouldn’t be able to defraud the federal government and get away with just a slap on the wrist.” The message is clear: Pay up, or get out.
Sen. Peter Welch (D-Vt.) is co-leading the Senate version of the bill, and the financial bite these companies will feel depends on how big their settlement was. For companies with settlements under $500 million, they’d have to fork over 0.75 percent of their net income. If it’s between $500 million and $1 billion, they’re on the hook for 1 percent. And if it’s over $1 billion? Well, that’s a hefty 1.5 percent.
But wait, there’s more! That percentage increases based on how many blockbuster drugs the company’s rolling in at the time. So, the bigger the business, the more they have to contribute. It’s kind of like a “you did the crime, now fund the science” situation.
The funds collected under the Medical Innovation Act would be earmarked for a variety of important initiatives: treatments and diagnostics for unmet medical needs, grants for early-career scientists, research into diseases that are draining federal health care dollars, and general biomedical research. This is a win for science and health. Companies that break the rules will face real financial penalties.
This is not the only piece of medical legislation floating in the halls of congress; Senator John Cornyn(R-TX) introduced the Accelerating Biomedical Innovation Act, which requires the Department of Health and Human Services to establish a center to accelerate the development of advanced medical countermeasures.
In short, Warren and Schakowsky are making sure Big Pharma’s bad behavior doesn’t go unnoticed—or unpaid.