Recently in New Hampshire, President Biden praised his administration’s policy to start imposing price controls on what Medicare pays for prescription prices, a policy enthusiastically endorsed by Democrat presidential candidate Kamala Harris. They’re starting with ten particular drugs, and they want to rapidly extend the price controls to all of them.
They try to disguise their scheme by saying all they want to do is give Medicare the power to negotiate prices. But given Medicare’s overwhelming buying power, this is price controls under another name.
Already, the results are beginning to have a calamitous effect of slowing down investments by pharmaceutical companies in new medicines and medical devices essential to Americans enjoying a healthier and longer life.
Bringing a new drug to market is a horrifically expensive proposition, costing over $2 billion and years of testing before getting approval by the FDA.
The actual physical manufacturing cost of a drug is the least of it. Creating or improving a medication or device through the extensive, expensive research and development process is where the real costs come in.
Say the way words “price controls” and most people immediately grasp that this is a losing, harmful proposition. Hence, the Biden-Harris approach of trying to disguise what they’re actually up to.
Vice President Harris got a hard lesson in the need to hide one’s true intentions. Earlier in her campaign, she laid out a plan to address the economic mess she and Joe Biden did so much to create. She painted a picture of “greedy” supermarkets and grocery stores, accusing them—despite paper-thin margins of less than two cents on the dollar—of price-gouging. Her solution: price controls.
Commentators—including many left-of-center— ridiculed her nostrums as economically illiterate.
Chastened, she reverted to the obfuscation used concerning drug price controls. Her tie-breaking vote on the obscenely misnamed Inflation Reduction Act (IRA) set up that Medicare drug price scheme that had long been a goal for Democrats.
But the legislation’s malevolence didn’t stop there. In addition to imposing price controls on select drugs, the IRA restructured the Part D prescription drug coverage for seniors. Democrats sought to reduce costs for seniors by capping them and shifting the risk to the insurance companies that service Part D. At the same time, the legislation forced insurers to limit premium increases to 6% annually. Feeling the squeeze, some insurers are leaving Part D altogether. The number of plans seniors can choose from plummeted by 11% in one year alone.
Most remaining plans are responding by raising the price of their coverage. The price of a Part D plan shot up almost 60% this year and will more than triple in in 2025. Despite the premium cap—which only applies to base coverage—premiums that seniors have to pay are going up by as much as 179%. The Biden-Harris administration realized this would not sit well with older voters in an election year, and so Democrats cobbled together a three-year “demonstration project” to subsidize Part D and disguise the increase. That project will cost taxpayers between $5-10 billion.
Yet despite all the evidence of how the IRA is driving up costs, the Harris campaign continues to brazenly peddle the fiction that “American taxpayers are expected to save $6 billion on prescription drug costs.” That’s a phony figure; the alleged “savings” are based on the full list price. In fact, the Price Benefit Managers (PBMs) claim to have beaten the government of six of the ten prices recently unveiled.
Then there’s the question of whether savings for the government are savings in any real sense.
Let’s not forget that the IRA created the drug price fixing scheme, at least in part, so that it could divert the expected $260 billion in Medicare “savings” to cover EV subsidies and other green new deal spending projects. Those “investments” have aided—not seniors—but younger, wealthier Americans who’ve exploited generous tax breaks on expensive EVs and solar panels. But they haven’t spurred the green revolution Democrats had hoped for, as pathetic sales of electric cars have shown.
Drug research is also cooling in the wake of the IRA. Charles River, a drug-development services provider in Boston, has reported that business is souring because drugmaker clients are slashing budgets. For the industry, that means fewer projects and the downsizing of their workforces. Some companies, foreseeing how the IRA would disincentivize the development of new medicines, were cancelling programs as the bill was being passed. More have followed. Others in the industry have made clear they may have to take different approaches to maximize the return on their research investments. For some, that may lead to holding off on bringing drugs to market until they can be proven to work for larger populations.
The net result will be that fewer new, life-saving drugs will be developed. For those that make it, the time it takes them to come on the market will be slower.
None of this has cooled Democrats’ desire to expand this misbegotten program. Originally, the IRA laid out a plan to ultimately target the top 50 drugs. But now Harris wants to hit 500 prescription drugs. What she and her fellow travelers are proposing is nothing short of a virtual government takeover of the American pharmaceutical industry.
Having gotten the camel’s nose under the tent with the IRA, Democrats are poised to expand government controls across the economy. Not just pharmaceuticals but housing, agriculture, energy—everything—will be in the crosshairs of these radicals.
And make no mistake: there will be huge hidden costs and fake savings of the kind we’re seeing with the IRA. Americans would then experience what billions of people throughout history have endured under socialism—immense misery.
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