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Let's Hope Drug Companies Win Price Controls War

Let's Hope Drug Companies Win Price Controls War

New drugs to treat illness and disease are purified in the laboratory. Expect less of it if government imposes more price controls, taking away drugmakers' profit incentive. (Dreamstime)

Sally Pipes By Tuesday, 26 September 2023 12:28 PM EDT Current | Bio | Archive

The House Committee on Oversight and Accountability met last week for a hearing on the Inflation Reduction Act's first year. As one of the witnesses pointed out, the law's implementation — particularly its drug pricing reforms — have already run afoul of some of our government's most basic norms of transparency and accountability.

The IRA gives federal officials the authority to dictate what Medicare pays for certain medicines — a scheme intended to reduce the government's drug bill. Late last month, the Department of Health and Human Services announced the first 10 drugs subject to the law's price controls, which include the blood thinners Eliquis and Xarelto.

These price controls represent an unprecedented intervention in the market for prescription drugs that is likely to carry serious negative consequences for patients. But according to testimony delivered before the House Oversight Committee by Joel White, president of the Council for Affordable Health Coverage, the program also sets a dangerous precedent for how laws get implemented.

Normally, federal officials would give citizens a chance to voice concerns about a policy shift of this magnitude — and would need to address that feedback in the final policy. But the IRA's drug pricing provisions sidestep this process altogether by requiring the rule be implemented by "program instruction or other forms of program guidance" — a sub-regulatory process in which the public gets little say.

White goes on to note that countless decisions about drug pricing — including which drugs get included in the program, as well as the prices themselves — are exempt from administrative and judicial review.

In short, the IRA gives the Biden administration sweeping powers to set the prices of prescription drugs while providing citizens, the judiciary, or even government administrators with no means of challenging its dictates, no matter how disastrous they may be.

America's relatively free market in prescription drugs has been an engine of medical progress for decades. It incentivizes risk-taking and innovation in the face of long odds. Nine in ten drugs fail once they reach clinical trials. The possibility of a big payoff — or at least, enough revenue to cover development costs — is what keeps money flowing into pharmaceutical research.

The profit motive is one reason why once-deadly diseases like HIV/AIDS are now manageable chronic conditions for many people — it was in drug companies' financial interests to make it so.

Price controls are the most reliable way to dismantle this system.

It wasn't long ago that Europe was the world's top source of new medicines. Only after a wave of price-control policies swept the continent in the 1980s and 1990s did the United States emerge as the world leader in pharmaceutical innovation. Today, we're responsible for well over half of all new drugs.

The IRA has brought Europe's anti-innovation policies to the United States. Once the law's price controls take effect, medical science may never be the same.

According to a recent analysis by the Information Technology and Innovation Foundation, foreign price controls currently cost the world around 25 new medicines each year. Once America's price controls are in place, the number of new medicines available on the global market could plummet precipitously. One study projects that the IRA's price controls will prevent as many as 139 drugs from being developed over the next 10 years.

If pharmaceutical firms can't expect to be paid prices commensurate with the value they'd command on the open market — as the federal government has made clear will be the case — then they're not going to attract the kind of investment needed to develop the next breakthrough cancer medicine or Alzheimer's therapy.

Patients deserve a health sector that is sensitive to their needs and that encourages progress toward better medical treatments. In short, they deserve a dynamic, competitive market — not an unaccountable bureaucracy. Unfortunately, Democrats aren't giving them a say in the matter.

Several drug companies have sued to halt the implementation of the IRA's price controls. Patients should hope that the companies prevail.

Sally C. Pipes is president, CEO, and the Thomas W. Smith fellow in healthcare policy at the Pacific Research Institute. Her latest book is "False Premise, False Promise: The Disastrous Reality of Medicare for All," (Encounter Books 2020). Follow her on Twitter @sallypipes. Read Sally Pipes' Reports — More Here.

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The IRA has brought Europe's anti-innovation policies to the United States. Once the law's price controls take effect, medical science may never be the same.
drug companies, price controls, inflation reduction act
Tuesday, 26 September 2023 12:28 PM
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