The hammer drops next week on one of the most draconian price control schemes ever concocted in the U.S.
President Biden will announce on Tuesday the first 10 Medicare Part D prescription drugs forced through a torturous maze called the Drug Price Negotiation Program, enacted this time last year as part of the ridiculously named Inflation Reduction Act—more accurately called the Innovation Reduction Act.
Pharmaceutical companies already have announced that more than two dozen promising drugs will be pulled from the research table because the CEOs don’t see any way they could recoup their investment in the new medicines under the government price control scheme.
The Congressional Budget Office had fantasized that only two new drugs would be lost over the next decade.
Nina Schaefer of Heritage and I wrote a piece for The Daily Signal detailing the impact: Medicare Drugs on Chopping Block.
Here are some of the key points we make:
- Drug development will be decimated as 135 fewer drugs will be brought to market, amounting to $18 trillion in health-related losses through 2039, according to University of Chicago economist Tomas Philipson.
- “This drop in new drugs is predicted to generate a loss of 331.5 million life years in the U.S.–31 times as large as the 10.7 million life years lost from COVID-19 in the U.S. to date,” Philipson writes.
- Drug companies will be dragged to the “negotiating” table and face enormous and punitive fines if they don’t comply. Merck estimates that refusal to negotiate for even just one drug could incur fines of tens of millions of dollars on the first day—increasing to hundreds of millions of dollars per day thereafter.
- Each year, the Centers for Medicare and Medicaid Services will add more and more drugs to its target list. Americans can expect to see fewer new cures and treatments along with the same restrictions and rationing that patients face in other countries with government-run, price-controlled health systems.
Seven companies have filed lawsuits against the HHS arguing that the drug price program is unconstitutional, saying it violates the First Amendment (compelled speech), Fifth Amendment (due process and unlawful taking), and the Eighth Amendment (excessive fines) as well as other constitutional harms. Two plaintiffs have filed motions seeking injunctive relief.
Nonetheless, the White House is planning a big rollout on Tuesday of the dreaded list and no doubt will be bragging that it’s actions will dramatically lower drug costs for seniors.
- Economist Doug Holtz-Eakin of the American Action Forum reports that fewer than 10% of seniors will benefit at all. For those who do see savings, he argues, they will be modest. Fully 69% of those who see any savings will pocket less than $300.
And all of this is being done so the Biden administration can “save” an estimated $238 billion over a decade, money that it does not plan to reinvest in Medicare to stave off the program’s pending bankruptcy but rather to fund its radical agenda, especially its climate change initiatives.
Philipson argues that the IRA’s green energy “savings” are trivial compared to the damage done by its incredibly misguided price control scheme. “This is because people value their health far more than a lower energy bill,” Philipson explains.
Congress has held numerous hearings to investigate the expected impact of the new law. It must continue its oversight and use its authority where possible to curtail the Biden administration’s plans as the law makes its way through the courts. With fewer cures and treatments, lives are at risk