Reduced drug prices have unacceptable cost
The Biden administration recently released its list of the first ten drugs on the Health and Human Services' (HHS) price-chopping block. Through Medicare driving prices down, President Biden promised that personal spending on these expensive drugs will decline. However, the price the public will pay in the future is huge — in fact, unquantifiable and unacceptable.
President Biden assured the public that prices would be "negotiated," as required by his disingenuously titled Inflation Reduction Act of 2022. What is really happening is central economic control, federal price-fixing.
When Medicare negotiates drug prices, there is a massive power imbalance. A good analogy would be a pharmacist in a rowboat negotiating the right of way at sea with a nuclear aircraft carrier. Medicare will quote a price and then say to drug manufacturers: take it or leave it, just as Medicaid currently does with payments for physicians. Centers for Medicare and Medicaid Services releases an allowable reimbursement schedule. Physicians can accept the government price or not, period. That is how government agencies negotiate.
Some medications, like the new forms of insulin, are longer-lasting, may be taken orally rather than by injection, and have fewer side-effects. Others, like Enbrel, Imbruvica, and Stelara, treat the cause of disease rather than merely symptoms. Entresto helps damaged heart muscle build healthy tissue, not possible with earlier drugs. Enbrel and Stelara treat auto-immune conditions that were previously untreatable. In other words, all these drugs provide great value to patients in terms of improved quality of life and even survival.
All these drugs were the result of billions invested in R&D. The drug companies that created them should be rewarded, not punished. Don't forget the billions that drug companies invested in drugs that did not pan out. With Biden's federal fixed drug pricing, pharmaceutical manufacturers cannot afford to take a chance on new drug ideas.
Reductions in out-of-pocket drug spending will start in 2026. The true cost will be felt much later. It will be huge and incalculable. That cost will be the loss of future medical miracles like the very drugs Biden is short-changing today.
Imagine that an administration fifteen years ago had passed a law federally fixing drug prices. Today's patients would have none of these medical miracles. And today's clinicians would have to rely on older drugs that aren't as good or, in many cases, no drug treatment at all.
There is a way to reduce the cost of drugs and still encourage — with money via patent protection — drug companies to invest in R&D. Simplify and streamline the process for getting a new drug into clinical care. The cost of required clinical trials is $2–3 billion plus another billion in FDA administrative process fees along with a 12-year time lag to get one miracle drug to the public.
The FDA is ineffective and wastefully expensive and was aptly titled Death by Regulation. Chopping the FDA is a good place to start reducing the cost of drugs.
Central economic control, such as price-fixing, is a common feature in socialist and communist societies. History shows long waiting lines for free government-supplied drugs in the USSR and can point to the destruction of a once vibrant indigenous Italian pharmaceutical industry. Economists can quote the disadvantages of a command economy: inefficiency, shortages, low quality, and no innovation. The reputed advantages of price-fixing — equality and low unemployment — call to mind Winston Churchill (1945): "The inherent vice of capitalism is the unequal sharing of blessings. The inherent virtue of socialism is the equal sharing of its miseries."
Fixing prices for pharmaceuticals will produce small short-term out-of-pocket savings and a very large, long-term loss for Americans.
Deane Waldman, M.D., MBA is professor emeritus of pediatrics, pathology, and decision science; former director of the Center for Healthcare Policy at Texas Public Policy Foundation; and author of the multi-award-winning book Curing the Cancer in U.S. Healthcare: StatesCare and Market-Based Medicine.