After the Senate passed the Inflation Reduction Act (IRA) on a partisan vote over the weekend through reconciliation and the bill now makes its way to the House for a likely vote on Friday, August 12, the Council for Citizens Against Government Waste (CCAGW) is reiterating how detrimental the healthcare provisions of this legislation are for the American people.  While Senate Majority Leader Chuck Schumer (D-N.Y.) was “elated” about the vote to “change the world,” cutting down the number of future cures and giving the government more control over an individual's healthcare decisions is not something about which anyone should be happy.

CCAGW has long opposed pharmaceutical price controls, including those in the Inflation Reduction Act.  They will not lower costs or provide more patient access, but instead will significantly harm the development of future cures.  The IRA will further distort the medical marketplace by allowing the federal government to set pharmaceutical prices under the popular and successful Medicare Part D program, where prices are already subject to private sector negotiations that have proven to lower costs.

CCAGW agrees with economists Stephen Moore and Tomas J. Philipson, who wrote in their August 7, 2022, Wall Street Journal op-ed that the Inflation Reduction Act includes “one of the greatest misallocations of federal resources in American history.”  It would increase costs by $288 billion for the U.S., “which saves and extends lives,” and move that money “to the climate-change industrial complex, which makes energy more expensive.” 

Philipson is the co-author with Giuseppe Di Cera of the August 2022 University of Chicago issue brief, “The Impact of Biopharmaceutical Innovation on Health Care Spending,” which 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 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 CBO, which finds only five drugs will be lost through 2039, equaling a 0.63 percent reduction.” 

The August 2022 issue brief noted that labor costs account for 70 percent of healthcare spending, similar to other industries.  Over the past 20 years, “profits and sales by research-based pharmaceutical companies made up 1.0% and 7.5% of total healthcare spending, respectively.”  The authors concluded that “more medical innovation is cost effective to consumers because new drugs create cost offsets, or reductions in total health care spending.”

For rare disease patients, the loss of future new cures is especially troubling, since 93-95 percent of the 30 million Americans living with one of more than 7,000 rare diseases are still waiting for an FDA-approved treatment to be developed.  And the chances of developing cures will be significantly lessened by the Democrat-led Inflation Reduction Act.

Instead of passing this deplorable legislation, the House should look to free market solutions to lower drug prices, like expanding health accounts and telehealth, give patients more control over their healthcare decisions, and deregulating the marketplace to offer more options.  Stifling innovation by limiting competition is not the answer.  When the IRA is considered on the floor of the House, every representative should consider the human cost of the pharmaceutical price controls and the millions of patients, which will include their families, friends, and constituents, who will be negatively impacted if they vote in favor of its passage.