As members of the 118th Congress consider what to do to fix the nation’s healthcare system, one of the first actions they should take is to hold hearings on the impact of the price controls on pharmaceuticals that were included in the Inflation Reduction Act (IRA).  The law authorizes government-controlled drug price negotiations under Medicare Part D, which covers retail prescription drugs.  These price controls give unelected bureaucrats more power to decide which drugs will or will not be worthwhile to create through time-consuming and expensive research and development, resulting in less access to needed cures and treatments.  This solution in search of a problem was particularly disturbing since Medicare Part D drug prices are already subject to private sector negotiations and the program is very popular and successful.

According to the Congressional Budget Office (CBO), the associated costs to bring a new drug from lab to market averages between $1 billion to $2 billion with only about 12 percent of the drugs entering clinical trials ever receiving final Food and Drug Administration (FDA) approval. Rather than encouraging new drug innovations and cures, the price controls found in the IRA create a barrier to successfully bringing safe and effective cures to market, especially for smaller companies.

An August 2022 University of Chicago issue brief, “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 analyzed 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 those projected by CBO, which finds only five drugs will be lost through 2039, equaling a 0.63 percent reduction.” 

The popular narrative that drug prices are “skyrocketing” has paved the way for government intervention into the medical marketplace and the passage of detrimental price control provisions in the IRA.  Price controls have historically resultedin shortages and rationing.  Passage of the IRA will allow federal government officials to meddle in the medical marketplace and cause market distortion.  The IRA’s drug price controls are already doing damage.  Less than three months after the IRA was signed into law, Eli Lilly and Company announced that it was stopping research on a $40 million cancer drug, which “in light of the Inflation Reduction Act, … no longer meets our threshold for continued investment,” and research on a drug to treat Stargardt disease, a rare eye disorder, was suspended by Alnylam because the company needed “to evaluate the impact of the Inflation Reduction Act.” 

Congress should consider in its hearings on price controls S. 4953, the Protect Drug Innovation Act, introduced by Sen. Mike Lee (R-Utah).  Sen. Lee said, “Price controls never work.  Instead, they exacerbate the problems they seek to resolve.  Mandating fixed prescription drug prices will ultimately result in the shortening of American lives.  Instead of repeating past mistakes, it’s time we address what’s driving the cost of prescription medications and adopt a regulatory environment that works to everyone’s advantage.”  

If allowed to continue, the price controls in the IRA will do irreversible damage to the future development of cures impacting tens of millions of Americans.  There are more than 7,000 rare diseases without any treatments or cures.  Members of Congress should not want to be in the position of determining which diseases will remain untreated and uncured.

Any legislation enacted by the 118th Congress should avoid price controls and market manipulation.  The damage from the IRA has begun.  Passage of Sen. Lee’s legislation would help to eliminate the adverse impact of price controls and ensure continued access to future cures and treatments for all Americans.  Efforts to increase access to patients and bring safe and effective drugs to market at a lower cost can and should be a top priority for the new Congress.