Biden-Harris CMS Announces Price Controls on 15 More Medicines

Today, the Biden-Harris Administration announced price controls on 15 more drugs, which brings the total amount of price-controlled drugs to 25, just days before the inauguration of President Donald Trump.

These disastrous price controls will create shortages, increase costs on other drugs, and discourage companies from entering the market. In healthcare, diminished innovation and shortages cost lives. Further, rather than returning the “savings” from these price controls back to seniors, the money will be spent on green energy subsidies.

If manufacturers suffer a shortage due to prices being set lower than the equilibrium market rate, millions of seniors’ access to vital treatments for type 2 diabetes, pulmonary disease, cancer, etc. would be diminished.

The manufacturers who create the selected drugs are also those who invest heavily in research and development of other treatments. If they cannot make up for these losses, they will be forced to reduce important medical research into other cures and treatments.

The Inflation Reduction Act gave the Health and Human Services Secretary the authority to “negotiate” the price of prescription drugs on behalf of Medicare. In reality, the Secretary is given the power to simply determine the price he or she deems acceptable and impose a steep tax of up to 95 percent on companies who charge more. The number of drugs the HHS Secretary sets prices for will increase by 15 in 2028 and 20 in 2029, for, eventually, a total of 60. 

It is imperative that lawmakers fully repeal these provisions of the IRA. Surely, we must resist efforts to expand these dangerous policies.

The selected drugs are as follows:

1) Ozempic; Rybelsus; Wegovy – Type 2 diabetes; Type 2 diabetes and cardiovascular disease; Obesity/overweight and cardiovascular disease

2) Trelegy Ellipta – Asthma; Chronic obstructive pulmonary disease

3) Xtandi – Prostate cancer 

4) Pomalyst – Kaposi sarcoma; Multiple myeloma

5) Ibrance – Breast cancer

6) Ofev – Idiopathic pulmonary fibrosis

7) Linzess – Chronic idiopathic constipation; Irritable bowel syndrome with constipation

8) Calquence – Chronic lymphocytic leukemia/small lymphocytic lymphoma; Mantle cell lymphoma

9) Austedo; Austedo XR – Chorea in Huntington’s disease; Tardive dyskinesia

10) Breo Ellipta – Asthma; Chronic obstructive pulmonary disease

11) Tradjenta – Type 2 diabetes

12) Xifaxan – Hepatic encephalopathy; Irritable bowel syndrome with diarrhea

13) Vraylar – Bipolar I disorder; Major depressive disorder; Schizophrenia

14) Janumet; Janumet XR – Type 2 diabetes

15) Otezla – Oral ulcers in Behçet’s Disease; Plaque psoriasis; Psoriatic arthritis

Given the basics of economic supply and demand principles, there are inevitable consequences: a shortage of said drugs and/or price increases on other drugs and/or a reduction in R&D spending by manufacturers. None are acceptable.

While the idea of simply “lowering prescription drug costs” through blunt force can be attractive, behind each of the drugs subject to price controls are companies that do vital work in medical innovation. When extorted by the U.S. government, they will have to make up lost costs elsewhere.

This law discourages new medical innovation – a consequence that will have the furthest-reaching effects. This is because it increases the financial risk companies take on when they start to develop new drugs. Under this law, they may never recoup the amount of money they put into R&D. Notably, in an industry like drug development, the risk is already very high.

During an average drug development process, a manufacturer must invest an average of $2.6 billion and spend 11.5 to 15 years in research and development. Even so, most drug development programs fail.

As detailed by the Information Technology & Innovation Foundation (ITIF), for 5,000 to 10,000 compounds screened during basic drug discovery phases, 250 molecular compounds (2.5 to 5 percent) make it to preclinical testing. Of the 250 molecular compounds, 5 make it to clinical testing. Thus, as little as 0.05 percent of drugs make it from drug discovery to clinical trials. Of the few medicines that make it to clinical testing, only about 12 percent of medicines that begin clinical trials are approved for introduction by the FDA.

Even if a drug is approved, it is likely that the profits from said drug will not recoup its R&D costs. One study in the Health Economics journal found that 80 percent of new drugs made less than their capitalized R&D costs.

Needless to say, starting a new drug program is, statistically, an almost guaranteed financial loss for drug manufacturers. Now, even if their drug is highly effective and popular, companies risk their prices being capped by the federal government.

Because of this dynamic, a CBO report analyzing the proposed price controls in the IRA found that “about 15 fewer drugs would be introduced over the next 30 years.” While 15 fewer drugs could easily translate into the needless death and/or decline in the quality of life of thousands, this number is still a gross underestimation.  

In fact, one study, conducted by Tomas J. Philipson and Giuseppe Di Cera out of the University of Chicago, details how the IRA’s price control provisions will lower R&D activity so drastically that it will result in 135 fewer new drugs, generating a loss of 331.5 million life years in the United States.

The loss in R&D spending on cancer treatments alone will total $18.1 billion annually, wiping out nearly a third of the current annual spending on this research. This is particularly ironic given the Administration’s alleged goal to eradicate cancer through his “Cancer Moonshot” program.

Even before implementation, several drug manufacturers have already warned of development programs they had to end or will likely have to end, including Eli Lilly, Alnylam, Bristol Myers Squibb, AstraZeneca, Novartis, Sage Therapeutics, Amgen, etc.

Instead of seniors, Medicare savings from “negotiations” will go towards green energy subsidies. Instead of taking the savings from the IRA’s Medicare reforms and putting it towards lowering costs for seniors or preventing looming insolvency, the savings were spent benefiting wealthy Americans through green energy tax credits.

While the Biden-Harris administration is now advertising the billions of dollars the government will be saving, they fail to acknowledge that seniors will not be the ones seeing these savings.

The senior-subsidized green energy provisions include a $7,500 tax credit for luxury electric vehicles, a $4,000 previously-owned electric vehicle credit, an annual $1,200 credit for “energy efficient” doors and windows, and more.

As Mark Merritt explains in the Wall Street Journal, “the program’s costs are projected to spiral from about $1 trillion this year to $1.8 trillion in 2031,” negating any deficit reduction supposedly designed to reduce inflation through the law.

At a time when Medicare is set to become insolvent and its enrollees, on average, earn less than $30,000 a year, roughly $280 billion in savings from the bill’s Medicare prescription drug provisions are going to these green energy handouts.

Without giving any thought to the consequences or tradeoffs of “just making companies charge less for drugs,” the Biden-Harris Administration will be responsible for an abhorrent loss of life because of its policies.