Democrats may find a receptive audience in an administration that has already demonstrated an appetite for manipulating market forces for medicine.
Look for Democrats to subject even more medicines to government strong-arming.
S torm clouds are gathering for Republicans ahead of next month’s midterm elections. If the forecast holds, a divided government could leave Washington gridlocked for two years. Yet one policy idea being floated on Capitol Hill may find support from both congressional Democrats and the White House during the stalemate. For those who favor limited government and competitive markets, the prospect is unnerving.
In 2022, President Joe Biden and his allies in Congress passed the Inflation Reduction Act, sprawling legislation that established a government price control scheme. The law requires that drugmakers “negotiate” prices with the feds for some medications covered by Medicare. “Negotiate” is a buzzword used to avoid the stink of government coercion. But in reality, “strong-arm” fits better.
If companies don’t agree with the price set by Uncle Sam, products get slapped with a tax of up to 95 percent. To borrow a line from The Godfather, the government makes an offer drugmakers can’t refuse.
The goal is to save the government money by forcing companies to sell products at below-market rates. But distorting market signals has consequences — and in this case, that’s a chilling effect on the development of new medicines. Bringing a new drug to market can cost upwards of $2 billion. If the likelihood of recouping that investment shrinks, so too does the motivation to innovate. If the government compelled John Deere to sell tractors at a steep discount, would the company still have an incentive to develop new models?
The scheme was initially championed by the Biden administration and scorned by Republicans. But the political lines are blurring: The current White House appears to be, at best, indifferent to the program — and at worst, supportive. More medicines become subject to the government price ploy every year, a trend that has gone uninterrupted during Trump’s second term.
Now Democrats see an opening to widen the law’s scope. With an eye toward reclaiming power, Senate Democrats unveiled a plan earlier this year that would expand the government price controls passed in 2022. The proposal would subject more medications to government mob-negotiations and shorten the timeline for when products can start getting shaken down by Washington. Under current law, small-molecule drugs generally become eligible for selection seven years after FDA approval, compared with eleven years for biologics.
It’s not difficult to imagine a Senate led by Chuck Schumer (D., N.Y.) and a House helmed by Hakeem Jeffries (D., N.Y.) advancing a version of this proposal and sending it to the president’s desk next year. Democrats may find a receptive audience in an administration that has already demonstrated an appetite for manipulating market forces for medicine.
President Biden opened the door to drug price controls, and Democrats will likely try to finish the job and knock it off its hinges if Congress flips. The question is whether the White House will stand by the principles of limited government and free markets. Otherwise, America’s leadership in biotechnology and medical innovation will suffer.