OPINION:
When it comes to the Inflation Reduction Act’s heavy-handed new authority on drug pricing, there’s one immutable fact to remember and repeat as a mantra: “Price controls equal choice controls.”
The predictable outcome of pharmaceutical price controls is the significant disincentivization of the research-and-development system that makes America the world leader in medical innovation. At the heart of the debate is whether we are going to improve our health care system using smart and evolving free-market principles or go down the sound-bite-laden path of government negotiation (today) and rationing care (tomorrow).
There are many issues and opinions regarding the benefits and risks of direct government negotiations of drug prices. Not surprisingly, where you stand often depends on where you sit. But one key question remains: Is the juice worth the squeeze? And is the imposition of price controls worth the benefit to society?
According to the Congressional Budget Office, direct federal price interference “would have a negligible effect on federal spending.” Unfortunately, when it comes to health care policy, many politicians of the Sandernista School conveniently ignore the facts when it doesn’t suit their political agenda.
Those who do not learn from history are bound to repeat its mistakes. In 2019, the House of Representatives, under then-Speaker Nancy Pelosi, made the Lower Costs Now Act (the infamous HR 3) a top legislative priority. It called for price controls via an international pricing index. Common sense prevailed, and HR 3 was relegated to the ash heap of history.
Today, congressional “progressives” are ready to take what they consider a Great Leap Forward in American health care reform. It is ill-considered and dangerous.
Under the Inflation Reduction Law, which was signed into law last August, Medicare will be able to negotiate certain prescription drug prices with pharmaceutical companies. In practice, these “negotiations” are federally mandated price controls.
Under the act, the government now has enormous power to name its own price for an increasing range of advanced medicines, and drugmakers would have little choice but to submit. The law also insists that these so-called negotiations be confidential. So much for sunshine and transparency.
And it’s likely illegal. On June 6, the pharma company Merck & Co. sued Uncle Sam seeking to halt the Medicare drug price negotiation program contained in the Inflation Reduction Act. Merck’s position is that it violates the First and Fifth amendments to the Constitution, arguing that under the law, drugmakers would be forced to negotiate prices for drugs at below-market rates.
They’re right.
Merck called the government’s tactics “coercive” and said it forces drugmakers to participate in “political Kabuki theater” by pretending these negotiations are voluntary. “This is not ‘negotiation.’ It is tantamount to extortion,” Merck said in the suit.
Merck also argues that the law will force companies to sign agreements conceding that the prices are fair, which it claims is a violation of the First Amendment’s protections of free speech. Considering that the U.S. government is Merck’s biggest customer, this lawsuit takes guts.
In the words of the Duke, actor John Wayne: “Courage is being scared to death — but saddling up anyway.” Protecting medical innovation requires true grit.
• Peter J. Pitts, a former associate commissioner at the Food and Drug Administrator, is president of the Center for Medicine in the Public Interest and a visiting scholar at the NYU School of Medicine, Division of Medical Ethics.
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