What Biden Doesn’t Want You Knowing About Drug Price Controls

On Thursday, the Biden administration marked the second anniversary of the passage of the so-called Inflation (Reduction) Act (IRA) by announcing the results of the first round of “negotiations” between Medicare and pharmaceutical manufacturers. According to the announcement, Medicare will save an estimated $6 billion on the selected prescription drugs in 2026, when the price controls take effect, with seniors saving another $1.5 billion in out-of-pocket costs.

But as with many things in Washington, things aren’t what they appear. For starters, these “negotiations” were conducted on anything but a level playing field. As noted previously, these “negotiations” included a maximum price the government must pay — meaning price controls — with companies that do not want to participate in this rigged process facing the option of taxes of up to 1,900 percent of the revenue of the products in question or dropping out of the Medicare and Medicaid programs entirely.

To put it bluntly, “the program represents a ‘negotiation’ in the same way a robber ‘negotiates’ with employees at the bank.” Other elements of this process to establish socialist-style price controls make it far less ideal than advertised.

Democrats Used the Cash Grab to Fund Climate Pork

As noted, the administration claimed Medicare will save money from the “negotiations.” But where will that money go? Not to seniors, that’s for sure.

According to the Congressional Budget Office, the IRA cut Medicare spending by a net $254.8 billion. That money didn’t go back into Medicare but instead funded other programs created in the law, such as myriad climate pork projects and money for 87,000 new Internal Revenue Service employees to audit taxpayers (including seniors).

The left will try to claim the law doesn’t reduce Medicare benefits, which misses the point entirely. The law takes dollars dedicated to helping seniors and instead spends that money on other totally unrelated projects. At a time the Medicare program remains functionally insolvent, Democrats’ raid actively harmed seniors by diverting dollars that could have been used to bolster the program’s solvency.

As harmful as they were, Congress’s actions in 2022 echoed what Democrat lawmakers did with Obamacare a dozen years before that and have proposed in other contexts as well: raiding Medicare to pay for other government spending. For the left, Medicare is much less a solemn obligation to seniors than it is a slush fund designed to be pillaged to expand government elsewhere.

Biden Bails Out Insurers with Taxpayer Billions

In the past few weeks, the Biden administration had to announce a “demonstration project” — i.e., government bailout — designed to “stabilize” premiums due to changes resulting from the IRA. A combination of richer benefits and structural changes in the law meant that many standalone prescription drug plans apparently submitted much higher premium proposals for next year. As a result, the administration hatched an insurer bailout to prevent massive premium hikes from landing in seniors’ mailboxes weeks before the November election.

The Centers for Medicare and Medicaid Services estimated the bailout will cost $5 billion this year alone, just about wiping out all of this year’s supposed “savings” from the drug “negotiations.” Moreover, the “demonstration” project is scheduled to last another two years, meaning the final cost could come to $15 billion or more. 

Of course, the cost of this bailout won’t stop Democrats from spending all the supposed Medicare “savings” from the IRA on green pork, IRS agents, and other projects. Likewise, Democrats seem uninterested in the inconvenient-to-them fact that this multibillion-dollar bailout is of questionable legality.

Price Controls Will Mean Fewer Drugs

It might surprise those on the left, but companies and investors generally respond to incentives. When the federal government decides to pay less for drugs, it will get fewer drugs in the future.

Estimates vary on the degree to which the IRA’s drug pricing provisions will affect pharmaceutical research, but they don’t vary on the direction — all signs point to fewer new drugs being created. The Congressional Budget Office concluded that more than a dozen fewer drugs will get developed. Another independent estimate of legislation similar to the IRA put the number at well over 100. Companies have already announced ways they are scaling back investments in response to the law’s price controls because, as one CEO put it, “there will be no economic return from doing” more research.

Whether the IRA will lead to one fewer drug, 100 fewer drugs, or 1,000 fewer drugs, the drug not created is the one that could save your life. Of course, often people won’t know if the IRA prevented a treatment that could have helped them. While Joe Biden and Kamala Harris want voters to believe they will get “free” savings, the American people will pay for the IRA for years to come, both in years of their lives through higher costs and lives not saved through drugs never developed.

Chris Jacobs is founder and CEO of Juniper Research Group, a policy consulting firm based in Washington, and author of the book “The Case Against Single Payer.” He appeared in the 1995 “Jeopardy!” Teen Tournament and is on Twitter: @chrisjacobsHC.