CBO Confirms IRA Drug Negotiations Raised Costs for Taxpayers
Price controls in any industry do not work and inevitably lead to shortages and disrupted markets. Price controls on biopharmaceuticals are especially harmful because they raise costs, stifle research and development of new cures and treatments, and threaten America’s position as the global industry leader. As the Inflation Reduction Act (IRA) was being considered by Congress and then signed into law on August 16, 2022, Citizens Against Government Waste (CAGW) cited the costs and impact of the legislation, especially the damaging and dangerous price controls on drugs.
Despite conclusive evidence of the negative impact of price controls the Congressional Budget Office (CBO) nonetheless estimated that the drug pricing “negotiation” provisions for Medicare Part D in the IRA would save the government $129 billion from 2022-2031. On July 29, 2026, CBO sent a letter with a new estimate of their cost in response to a May 26, 2026, request by House Energy and Commerce Chairman Brett Guthrie (R-Fla.), House Ways and Means Committee Chairman Jason Smith (R-Mo.), and House Budget Committee Chairman Jodey Arrington (R-Texas) asking CBO to explore the budgetary effects of the IRA’s provisions that affect Medicare Part D. The letter confirmed that instead of saving $129 billion, the provisions have cost $700 billion. CBO also initially claimed that spending on drugs would be reduced from $3,200 monthly to $2,300 monthly. Instead, drugs now cost $3,500 per month.
In a press release announcing CBO’s findings, Chairman Smith said “Washington Democrats’ Inflation Expansions Act was yet another costly promise that failed to deliver lower prices for seniors. Democrats promised lower prescription drug prices, but the Congressional Budget Office is once again confirming that their policies instead increased costs for America’s seniors and taxpayers by an additional $700 billion while offering 50% fewer drug plans for them to choose from. Plain and simple, Democrats have made it harder for seniors to afford prescription drugs.”
Chairman Arrington noted that Democrats used CBO’s analysis and “sold the American people a false bill of goods.” Chairman Guthrie said that in addition to the incorrect savings estimates, the IRA has “led to increased costs for taxpayers and instability in the marketplace.”
Proponents of price controls and greater government control in healthcare claim that these policies will help patients by lowering costs, but the reality is quite different. An August 2022 University of Chicago issue brief found that price controls would increase healthcare spending by $50.8 billion over the next 20 years and result in 135 fewer drugs, negatively impacting the lives of 2.47 million patients.
The CBO mea culpa adds to the plethora of evidence that price controls on pharmaceuticals increase rather than lower costs for patients and limit access to vital medications. Lawmakers should protect American biopharmaceutical innovation and global leadership by fighting back against price controls on pharmaceuticals and every other industry.
