Federal intervention in the healthcare marketplace, especially price controls in the name of reducing costs, has resulted in fewer choices and higher costs.  On August 26, 2022, President Biden signed the Inflation Reduction Act (IRA) into law. This bill includes devastating price control provisions that will further distort the medical marketplace by allowing the federal government to set prices on drugs they deem too expensive.    

As Milton Friedman said, “One of the great mistakes is to judge policies and programs by their intentions rather than their results.”  The cataclysmic IRA, enacted with the intent to lower drug prices and help patients, will instead create an invisible graveyard of patients and result in innumerable loss of life. 

On August 29, 2023, the Department of Health and Human Services announced the first 10 drugs selected for Medicare drug price negotiations under the IRA:  Eliquis, Jardiance, Xarelto, Januvia, Farxiga, Entresto, Enbrel, Imbruvica, Stelara, and Fiasp.  Over the next four years, Medicare will begin negotiating prices for up to 60 drugs covered under Medicare Part D and Part B and up to an additional 20 drugs every year after that. 

The “negotiations” are nothing of the sort.  As Citizens Against Government Waste (CAGW) noted in a September 2019 blog post, “This is not negotiation, it is criminal enterprise-level extortion.”  CAGW’s November 2021 issue brief, “Pharmaceutical Price Controls Are Bad Medicine,” reiterated this sentiment by stating the negotiations are “more like Al Capone holding a loaded gun to a victim’s head and asking for cooperation in a crime.” 

Before the passage of the IRA, investments in pharmaceutical research and development were already deemed high-risk.  According to Deloitte’s February 3, 2023, “13th Annual Pharmaceutical Innovation Report:  Pharma R&D Return on Investment Falls in Post-Pandemic Market,” the return on investments in pharmaceutical research and development in 2022 fell to 1.2 percent, the lowest return in 13 years.  Meanwhile, the average cost to develop a new drug from lab to market rose by $298 million to $2.3 billion in 2022. 

An August 2022, University of Chicago issue brief by Tomas J. Philipson and Giuseppe Di Cera, “The Impact of Biopharmaceutical Innovation on Health Care Spending,” found that price controls would increase healthcare spending by $50.8 billion over the next 20 years and result in 135 fewer new drugs, negatively impacting the lives of 2.47 million patients.  A November 29, 2021, University of Chicago issue brief by Philipson and Troy Durie phrased the impact of 135 fewer new drugs as “generating a loss of 331.5 million life years in the U.S., 31 times as large as the 10.7 million life years lost from COVID-19 in the U.S. to date.  These estimated effects on the number of new drugs brought to market are 27 times larger than projected by the Congressional Budget Office, which determined that only five drugs will be lost through 2039, equaling a 0.63 percent reduction.” 

Passage of the IRA and price control provisions included in the bill are already leading to less drug research and innovation.  In October 2022, Alnylam Pharmaceuticals cancelled its plan to expand and develop its RNA interference therapy to treat a rare eye disorder Stargardt disease, due to the Inflation Reduction Act provisions.  Alnylam also did not move forward with a phase 3 study on Amvuttra another drug that was approved to treat a rare disease called transthyretin-mediated amyloidosis.  Alnylam was in the process of researching the drug to be used to treat Stargardt.  Eli Lilly confirmed in June it halted development of 3 drugs thus far due to the IRA price controls.  Eli Lilly blames the IRA for the reason it halted research into a Phase 1 drug undergoing studies for treating various blood cancers.  Eli Lilly stated, “The IRA changes many dynamics for small molecules in oncology and when we integrated those changes with this program and its competitive landscape, the program’s future investment no longer met our threshold.”

Not only are fewer drugs being developed, but also the IRA price provisions encourage some drugs to be developed at a much slower pace.  Genetech CEO Alexander Hardy explained in an August 10, 2023, STAT interview, “that in the world prior to the IRA drug makers were incentivized to get drugs on the market as fast as possible, regardless of which disease they would be approved to treat.”  He noted that the IRA price controls incentive structures have changed and encourage drug developers like Genetech to slow-walk research on certain drugs, including an ovarian cancer therapy, to ensure the company will sell more medicine in the window before Medicare is allowed to negotiate prices, because the clock for when discounts can kick in is based off of when the drug is first brought to market.

The IRA will lead to an invisible graveyard of patients who never receive treatment because their life-saving cure will never be developed.

The price control provisions in the IRA currently being implemented by the Biden Administration are a financial and healthcare disaster.  Instead of creating barriers to innovation the federal government should encourage a competitive environment where drug research and development flourishes.  Stifling innovation through excessive regulation is the wrong solution and will continue to result in fewer drugs being developed and more lives lost.