The true cost of the IRA’s price controls therefore can’t be measured by the government’s immediate savings alone. Policymakers also need to ask what those controls do to the competitive market that is supposed to keep drug prices low for decades to come.
Four years ago, on August 16, President Biden signed the Inflation Reduction Act into law. Lawmakers promised that letting Medicare set drug prices would save taxpayers more than $100 billion over a decade.
New research suggests the IRA may accomplish the opposite in the long run.
A study by University of Chicago economist Tomas Philipson and his colleagues estimates that the law’s price controls could raise average lifetime prices for the first 25 medicines selected for price-setting by 19%.
How is that possible? Competition—or a lack thereof. Cutting the revenue a brand-name drug generates today can make its market less attractive to generic and biosimilar manufacturers tomorrow. Fewer competitors after the brand loses exclusivity can mean higher prices for years to come.
Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.
Medicare’s Drug Price Controls Could Actually Raise Prices In The Long Run
Sally C. Pipes
The true cost of the IRA’s price controls therefore can’t be measured by the government’s immediate savings alone. Policymakers also need to ask what those controls do to the competitive market that is supposed to keep drug prices low for decades to come.
Four years ago, on August 16, President Biden signed the Inflation Reduction Act into law. Lawmakers promised that letting Medicare set drug prices would save taxpayers more than $100 billion over a decade.
New research suggests the IRA may accomplish the opposite in the long run.
A study by University of Chicago economist Tomas Philipson and his colleagues estimates that the law’s price controls could raise average lifetime prices for the first 25 medicines selected for price-setting by 19%.
How is that possible? Competition—or a lack thereof. Cutting the revenue a brand-name drug generates today can make its market less attractive to generic and biosimilar manufacturers tomorrow. Fewer competitors after the brand loses exclusivity can mean higher prices for years to come.
Read the op-ed here.
Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.