The Biden administration just released their list of the first ten drug on the Health and Human Services’ (HHS) price chopping block. By Medicare “negotiating” the price down, President Biden promises that personal spending on these expensive drugs will decline. However, the price the public will pay in the future is huge and unquantifiable.
HHS estimates that enrollees taking the 10 drugs “paid a total of $3.4 billion in out-of-pocket costs in 2022 for these drugs.” Compare to recent CoViD outlays. Washington paid big pharma more than thirty billion taxpayer dollars for the disastrous mRNA vaccines and spent $2.3 trillion for the unnecessary CARES Act of 2020 (Coronavirus Aid, Relief, and Economic Security).
A part of his disingenuously titled Inflation Reduction Act of 2022, President Biden assured the public that prices would be “negotiated.” What is really happening is central economic control, federal price fixing.
When Medicare negotiates drug prices, there is a massive power imbalance. A good analogy would be a pharmacist in a rowboat negotiating the right of way at sea with a nuclear aircraft carrier. Medicare will quote a price and then say to drug manufacturers: take it or leave it, just as Medicaid currently does with payments for physicians. They release an allowable reimbursement schedule and physicians can accept the government price or not, period. That is how government agencies negotiate.
Reductions in out of pocket drug spending will start in 2026. The true cost will be felt much later. It will be huge and incalculable. That cost will be the loss of future medical miracles like the very drugs Biden is short-changing today.
The top ten drug hit list includes diabetes drugs like Fiasp and Novolog; blood thinners like Xarelto and Eliquus; Entresto, a combination of drugs to treat heart failure; and medications such as Enbrel and Stelara that help with auto-immune conditions. Every one of the ten medications is under still patent protection, i.e., they are new, expensive to develop and produce, and revolutionary improvements in medical care.
While insulin has been available for 42 years, the new forms like Novolog have great advantages over the initial compounding from Eli Lilly. They are longer lasting, some can be taken orally rather than by injection, and all have fewer side effects. There have been earlier drugs to treat heart failure, but Entresto appears to help the weakened heart muscle actually build new muscle tissue, which is new. Until Enbrel, Imbruvica, and Stelara, doctors could only treat the symptoms of Crohn’s disease or graft-versus-host disease. The three drugs mentioned attack the cause of these conditions rather than merely the symptoms.
In other words, these ten drugs provide great value in terms of improved quality of life for patients. The drug companies that created them should be rewarded not punished. Do not ignore the billions each drug company spent of R&D for other drugs that turned out not to be useful. With Biden’s federal fixed drug pricing, pharmaceutical manufacturers simply cannot afford to take a chance on a new drug idea.
If an administration fifteen years ago had passed a law federally fixing drug prices, today’s patients would not have Entresto, Enbrel, Fiasp, and Eliquus. They would have to rely on drugs that weren’t as good or in many cases, no drug treatment at all.
There is a way to reduce the cost of drugs and still encourage – with money via patent protection – drug companies to invest in R&D. Simplify and streamline the process for getting a new drug into clinical care. The cost of required clinical trials is $2-3 billion plus another billion in FDA administrative process fees along with a 12-year time lag to get one miracle drug to the public.
For those who say we need the FDA process to protect us, look at their total failure with CoViD-19. The CDC created a fake existential crisis over a new flu-like bug, and the FDA quickly approved a harmful drug – mRNA gene therapy – for mandatory mass vaccination. The FDA was and is ineffective, wastefully expensive, and aptly labelled, Death by Regulation. The FDA is a good place to start reducing the cost of drugs.
Central economic control, such as price fixing, is a common feature in socialist and communist societies. Historians can show long waiting lines for free government-supplied drugs in the U.S.S.R. and can point to the destruction of a once vibrant indigenous Italian pharmaceutical industry. Economists can quote the disadvantages of a command economy: inefficiency, shortages, low quality, and no innovation. The reputed advantages – equality and low unemployment – call to mind the words of Winston Churchill (1945). “The inherent vice of capitalism is the unequal sharing of blessings. The inherent virtue of socialism is the equal sharing of its miseries.”
Fixing prices for pharmaceuticals will produce small short-term out of pocket savings and a very large, long term loss for Americans.
Deane Waldman, M.D., MBA is Professor Emeritus of Pediatrics, Pathology, and Decision Science; former Director of the Center for Healthcare Policy at Texas Public Policy Foundation; and author of the multi-award winning book Curing the Cancer in U.S. Healthcare: StatesCare and Market-Based Medicine.
