Congressional Democrats are one step closer to passing their trillion-dollar "Build Back Better" spending package.
On July 6 U.S. Senate leaders hashed out a key proposal that would allow Medicare to "negotiate" with pharmaceutical companies over prescription drug prices.
The effort is part of Senate Majority Leader Charles Schumer's, D- N.Y., drive to coax centrist Sen. Joe Manchin, D-W. Va., into voting for the huge spending bill.
But what Democrats are contemplating is actually a de facto system of price controls — and it would destroy the market for drug research.
According to the most recent reports, the new package would empower the Secretary of Health and Human Services (HHS) to dictate what Medicare pays for a range of brand-name drugs. Drug companies that refuse to accept these "negotiated" prices would be subject to an excise tax as high as 95% on a drug's total sales.
In other words, the feds are trying to claim just about every dollar a pharmaceutical company makes on a drug.
These are price controls, plain and simple. Why would any company pump billions of dollars into drug research if the government can simply dictate the price of that medicine if the research works out?
As a result, they'd rob current and future generations of effective therapies and cures — all to save the government a few bucks today.
An analysis by the University of Chicago economist Tomas Philipson looked at a drug-pricing reform similar to Senate Democrats' current proposal.
By 2039, his study found, such a policy would result in 342 fewer new drug approvals.
For patients desperately waiting for a new multiple sclerosis breakthrough or a cure for Alzheimer's, this is an unthinkable price to pay.
This quest to undermine innovation in the name of cutting drug prices is at odds with the Biden administration's push to launch the Advanced Research Projects Agency for Health, or ARPA-H.
The agency's stated mission is to "make pivotal investments in break-through technologies and broadly applicable platforms, capabilities, resources, and solutions that have the potential to transform important areas of medicine and health."
Build Back Better's price controls are not in line with that mission.
The potential damage that Build Back Better could cause is not confined to the pharmaceutical industry.
Its price controls are largely designed to free up as much as $160 billion for Democrats to use on other pet projects.
Progressives' wish list for previous iterations of Build Back Better included subsidies for wind and solar energy, new tax credits for electric vehicles, and generous giveaways to higher education, including student aid for noncitizens.
This kind of profligacy was inadvisable a year ago, when BBB first took shape. With inflation at persistently high levels and the nation teetering toward recession, such a torrent of new government spending is downright reckless.
Pumping yet more money into the economy will only fuel the inflation crisis and leave households even worse off than they are today.
Americans are concerned about the high cost of prescription drugs — as they are about the price of gas, groceries, and countless other essentials. Build Back Better doesn't just ignore these urgent problems. It makes them worse. If progressives in Congress think voters won't notice this fact come November, they're in for a surprise.
Sally C. Pipes is president, CEO, and the Thomas W. Smith fellow in healthcare policy at the Pacific Research Institute. Her latest book is "False Premise, False Promise: The Disastrous Reality of Medicare for All," (Encounter Books 2020). Follow her on Twitter @sallypipes. Read Sally Pipes' Reports — More Here.
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