Not So Happy Birthday to the Inflation Reduction Act

The grossly misnamed Inflation Reduction Act (IRA), Pub. Law No. 117-169, included healthcare provisions that will not only fail to improve access to care or lower patient costs, but also have a devastating impact on medical research and development. On the second anniversary of its passage on August 16, 2024, the most concerning part of the legislation is taking effect through the implementation of government-controlled and imposed drug price negotiations under Medicare Part D, where prices are already subject to private sector negotiations that have made the program very popular and successful at a cost to taxpayers that is far lower than original estimates.

The Biden Administration announced a list of the prices set by the Department of Health and Human Services Centers for Medicare and Medicaid Services for the first 10 drugs impacted by the IRA price controls. These prices will take effect on January 1, 2026.

• Eliquis, made by Bristol Myers Squibb - $231.00 negotiated price, $521 list price
• Jardiance, made by Boehringer Ingelheim and Eli Lilly - $197.00 negotiated price, $573.00 list price
• Xarelto, made by Johnson & Johnson - $197.00 negotiated price, $517.00 list price
• Januvia, made by Merck - $113.00 negotiated price, $527.00 list price
• Farxiga, made by AstraZeneca - $178.50 negotiated price, $556.00 list price
• Entresto, made by Novartis - $295.00 negotiated price, $628.00 list price
• Enbrel, made by Amgen - $2,355.00 negotiated price, $7,106.00 list price
• Imbruvica, made by AbbVie and J&J - $9,319.00 negotiated price, $14,934.00 list price
• Stelara, made by Janssen - $4,695.00 negotiated price, $13,836.00 list price
• Fiasp and NovoLog, made by Novo Nordisk - $119.00 negotiated price, $495.00 list price

At face value, lower prices seem like a great deal for patients, but like with every action, there is an equal and opposite reaction. Citizens Against Government Waste (CAGW) has continuallywarned about the negative implications of price controls on pharmaceutical development. CAGW's November 2021 issue brief, "Pharmaceutical Price Controls Are Bad Medicine," is one of many such publications. Authorizing the government to set prices through "negotiations" for Medicare is not a new idea, as price control legislation has been introduced in every Congress since the Medicare Prescription Drug, Improvement, and Modernization Act became law in 2003. Now that the price ceilings are set, the government's increased control over healthcare will further stifle new drug development and lead to higher prices.

Numerous studies have verified these negative outcomes. 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 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."

Price controls have historically resulted in shortages and rationing. More innovation in the medical marketplace will lead to lower costs, not more government distortion. The price limits for these 10 drugs, and the desire of the Biden-Harris administration to go expand the limits on price control beyond the provisions of the IRA will lead to an invisible graveyard of patients who never receive treatment because their life-saving cure will never be developed.

• Healthcare
• Price Controls
• IRA