Late last week, the Biden administration released the final price schedule for the first ten Part D drugs subjected to Medicare price controls under the Inflation Reduction Act. National Taxpayers Union’s President Pete Sepp issued the following statement:
The Biden Administration may be touting the final price schedule for these ten drugs as a win, but it’s most certainly a loss for patients and taxpayers. Unfortunately, the Part D “negotiations” mandated by the Inflation Reduction Act will crush drug innovation while drug prices for seniors continue to grow. Some of the greatest costs will be passed on to future patients who will not receive a cure for their illness because this price schedule discourages innovation.
Over time, the evidence will likely continue to accumulate that investment in new drug development will be less robust, as America’s status as an ‘island of pricing freedom’ deteriorates. Taxpayers will lose a great deal as a result, since prescription medicines are often shown to ‘bend the cost curve’ in government health programs by reducing the need for more expensive surgeries, hospital stays, and other therapies.
Earlier this year, an NTU-organized statement signed by dozens of economists, tax experts, and health care policy leaders warned that “Imposing price controls on one part of Medicare would lead to higher costs for beneficiaries elsewhere, whether through higher premiums or increased costs in other parts of Medicare. In general, enforcing prices set at below-market rates leads to shortages, squeezes the cost bubble toward some other portion of the economy, and imposes a deadweight loss on society.” Their warnings remain relevant.
Already, the Administration is proposing a ‘demonstration project’ that would effectively provide billions in taxpayer subsidies to cover massive increases in Part D premiums—increases to which the Inflation Reduction Act of 2022 contributed. Once again, taxpayers are covering the tab for policy errors.
The next president should recognize these errors and immediately seek to end the coercive price control scheme. Ending the enforcement of the excise tax could be one way to stop this danger to taxpayers in its tracks.