Title: Democrats Push for Expansion of Drug Price Controls, Endangering Patient Access and Innovation
Subtitle: Proposed legislation would increase government control over drug prices, risking negative consequences for patients and the pharmaceutical industry.
It has been less than a year since the Democrats enacted the Inflation Reduction Act (IRA), granting Medicare the authority to set prices for certain drugs. However, the party is now seeking to expand these price controls further by introducing new legislation in both houses of Congress. Their ambitious bills aim to allow the government to refuse drug coverage and spur tougher negotiations with drug companies, based on the IRA.
The IRA, signed into law by President Biden in August, currently subjects 10 drugs to Medicare price controls starting January 2026. This number will increase to 15 in 2027, another 15 in 2028, and 20 more per year beginning in 2029. However, the Democrats’ SMART Pricing Act proposes even more stringent measures, seeking to increase the number of drugs subject to price controls to 20 in 2026 and reaching 40 drugs in 2027 and subsequent years.
The most radical aspect of the legislation is the extension of Medicare price controls to the private insurance market, as proposed in the House bill. Additionally, the SMART Pricing Act would subject drugs to price controls within five years of FDA approval, significantly quicker than under the IRA and potentially hindering the entry of generic or biosimilar competitors into the market.
Critics argue that such provisions could have severe consequences for both patients and the pharmaceutical industry. Generic firms, which rely on recouping upfront costs by setting slightly higher prices compared to brand-name drugs, may be discouraged from entering the market when the government imposes a price floor for brand-name drugs. This could potentially lead to higher costs for patients and eliminate the benefits of generic competition.
Moreover, a market without competing drug manufacturers is less resilient, as it leaves patients at risk if the sole producer of a necessary drug encounters production problems. With IRA price controls already causing some pharmaceutical companies to scale back research and development efforts, the proposed expansion of price controls could further undermine innovation in the industry. Novartis, for example, announced in May that it would discontinue the development of certain cancer drugs, citing the IRA as a factor.
The decline in drug research resulting from the existing price controls raises questions about the appropriateness of expanding these controls. Critics argue that patients will ultimately bear the burden of this misguided approach, paying the price in terms of restricted access to drugs and reduced innovation.
Sally C. Pipes, President, CEO, and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute, highlights these concerns. Her latest book, “False Premise, False Promise: The Disastrous Reality of Medicare for All” reflects her expertise in the field. She urges policymakers to reconsider the potential negative effects of expanding drug price controls.
In conclusion, the Democrats’ push for an expansion of drug price controls, as seen in the proposed SMART Pricing Act, raises concerns among critics who argue that these measures could harm patient access to medications and stifle innovation within the pharmaceutical industry. The debate surrounding this topic warrants a careful examination of the potential consequences before making any decisions that could significantly impact the healthcare landscape.