Inflation Reduction Act Drug Tax Provision Raises Prices for Consumers

Bidenomics isn’t working. While inflation has come down, it’s still stuck at levels not seen in decades. Even worse, the key drivers of inflation are “must have” purchases for the middle class — gasoline, housing, and groceries. Over the past year, the Federal Reserve has raised interest rates and sold balance-sheet assets in order to get headline inflation down. But despite this, food is 4.3 percent more expensive than last year, and housing is 7.3 percent more expensive. Gasoline prices spiked in August. The 30-year mortgage rate remains stubbornly above 7 percent on homes that still have Covid-spike prices, freezing out Generation Z and Baby Millennials from their first home purchases and locking others into starter homes. Even if all the inflation stopped today, prices are much higher than when Joe Biden took office and slammed the accelerator on the spending machine. We are stuck with that reality.

Now, the cost of living may be going higher for some prescription medicines for seniors. Congress last year passed the Orwellian-titled “Inflation Reduction Act.” One provision requires the administration to name ten Medicare drugs that would be subject to government “negotiation” on price, something it did this month. If a company does not accept the price control imposed on the drug, it will be forced to charge a 95 percent excise tax on the sale of that medicine (on everyone who buys it, not just seniors). That is not a typo. The alternative to a government price control (which is likely to result in drug scarcity and a lot less breakthrough drug research) is for the drug companies to sell their medicines with a 95 percent excise tax on top of the sales price. If you think prescription medicines are expensive now, wait until the government gets done negotiating for you.

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Ryan Ellis

Ryan Ellis is the president of the Center for a Free Economy and an IRS-enrolled agent.

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Bidenomics isn’t working. While inflation has come down, it’s still stuck at levels not seen in decades. Even worse, the key drivers of inflation are “must have” purchases for the middle class — gasoline, housing, and groceries. Over the past year, the Federal Reserve has raised interest rates and sold balance-sheet assets in order to get headline inflation down. But despite this, food is 4.3 percent more expensive than last year, and housing is 7.3 percent more expensive. Gasoline prices spiked in August. The 30-year mortgage rate remains stubbornly above 7 percent on homes that still have Covid-spike prices, freezing out Generation Z and Baby Millennials from their first home purchases and locking others into starter homes. Even if all the inflation stopped today, prices are much higher than when Joe Biden took office and slammed the accelerator on the spending machine. We are stuck with that reality.

Now, the cost of living may be going higher for some prescription medicines for seniors. Congress last year passed the Orwellian-titled “Inflation Reduction Act.” One provision requires the administration to name ten Medicare drugs that would be subject to government “negotiation” on price, something it did this month. If a company does not accept the price control imposed on the drug, it will be forced to charge a 95 percent excise tax on the sale of that medicine (on everyone who buys it, not just seniors). That is not a typo. The alternative to a government price control (which is likely to result in drug scarcity and a lot less breakthrough drug research) is for the drug companies to sell their medicines with a 95 percent excise tax on top of the sales price. If you think prescription medicines are expensive now, wait until the government gets done negotiating for you.