Biden blunders made drug price controls even worse
WASHINGTON EXAMINER
The comically misnamed Inflation Reduction Act imposed government price controls on prescription drugs by replacing the old non-interference principal, which used market-average prices to set drug reimbursement, with a scheme that allows the Secretary of Health and Human Services to directly set prices via a sham negotiation, in which the manufacturer has to agree or face a punitive seizure via a tax equal to 95% of the product’s total sales.
A system like that undermines the return on the multi-billion-dollar investment required to develop a new drug and bring it to market, resulting in fewer new cures and treatments. It’s a mistake, and it’s hard to think of how a policy like that could be made worse. And yet the Biden administration managed to do it. They made the price control regime much worse in practice than it was on paper, and while the short-term prospects for repealing the law are dim, the Trump administration can and should take immediate actions to reverse several specific Biden blunders.
Former President Joe Biden’s Center for Medicare and Medicaid Services, which was tasked with implementing the scheme, expanded its scope by ignoring some of the statute’s clear lines in at least three ways:
First, drugs with biosimilar (the term for generic biotech drugs) competition were supposed to be exempt, because they already face intense price competition and because patients and plans that don’t want to pay for the brand drugs have a ready alternative. But the Biden CMS not only ruled that such drugs are subject to the price control regime, but also used the prices of biosimilars as comparators to justify more stringent price controls.
Second, Biden’s CMS took words that do appear in the statute — “therapeutic alternatives” — and used them, without public comment, to build an entire pricing system that appears nowhere in the statute. They used the pricing of old-style chemotherapy agents as a benchmark for cutting-edge complex cancer drugs and other unrelated therapies. That move justifies draconian price controls on breakthrough cures, undermining the incentive to develop and bring them to market.
Finally, Biden’s CMS also bundled two insulins approved 17 years apart and called them one drug to qualify for the minimum sales threshold and drag them into the price control regime. Neither product qualified on its own. This dangerous precedent presents the risk that nearly any drug could be dragged into the price control regime via a bundling back-door, further reducing the incentive to develop drugs, especially drugs for rare diseases that would otherwise target niches narrow enough to escape the program’s reach.
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