Democrats have scaled down House Speaker Nancy Pelosi’s H.R. 3—a bill to impose price controls on prescription drugs—and put it in President Joe Biden’s Build Back Better plan.
In essence, prescription drug manufacturers would have two options if the bill becomes law: the freedom to set the price for the products they make or handing to the feds the revenue from those products.
Wait, wasn’t H.R. 3 about allowing the federal government to “negotiate” prices with prescription drug manufacturers?
No, that was only how the legislation has been marketed because it sounded less heavy-handed. But it was never about negotiations; it was always about the government dictating prices to drug makers.
Here’s how Pelosi described the original H.R. 3: “Gives Medicare the power to negotiate directly with the drug companies, and created strong new tools to force drug companies to the table to agree to real price reductions, while ensuring seniors never lose access to the prescriptions they need.”
What are those “strong new tools to force drug companies to the table”? Here is the language in H.R. 3’s legislative summary:
If a drug manufacturer refuses to participate in any part of the negotiation process or does not reach agreement with HHS, they will be assessed a Non-Compliance Fee starting at 65 percent of the gross sales of the drug in question and increasing by ten percent every quarter the manufacturer is out of compliance, up to a maximum of 95 percent. (Emphasis added)
That’s not 95 percent of the profit from the drug; that’s up to 95 percent of all revenue from its sale. To paraphrase The Godfather’s Don Vito Corleone: “The government’s gonna make drug makers an offer they can’t refuse.”
The BBB-adopted approach permits Medicare to begin dictating—er, “negotiating”—nine years after small-molecule drugs (i.e., generally pills) and 13 years after large-molecule biologics (i.e., injectable drugs) are approved.
Will drug makers spend the billions of dollars it can take to come up with a new, life-saving drug for, say, Alzheimer’s, Parkinson’s, cancer—or maybe the next pandemic—if they know politicians and bureaucrats will consider it a political victory if they make companies squirm?
Does anyone really think the drug price “negotiations” won’t be completely politicized when politicians and bureaucrats are sitting on one side of the table? Democrats are pushing hard for these price controls in part to win votes.
Yes, some drugs might be less expensive under the legislation. But many other drugs—even some very promising ones—will never be pursued once politics, not economics and the market, determines the price of drugs.