The downside of Biden's drug price control scheme

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Economic fallacies are like horror movie villains. They just won't stay dead.

On Tuesday, the Biden administration announced it had selected 10 drugs for Medicare price "negotiation." The list included drugs for diabetes, heart failure and blood cancer, among others. The White House said these are some of the most costly to the Medicare Program. In future years, Medicare will negotiate the prices on dozens of other drugs. The administration claims this will save money for both Medicare recipients and taxpayers

This sounds innocuous, even necessary. Of course, the federal government should use its purchasing power to obtain lower prices. But that's not what's happening here.

Consider Bristol Myers Squibb. Its blood thinner, Eliquis, is one of the 10 drugs on Biden's list. In a real negotiation, the company and Medicare would meet together. If they couldn't come to a mutually beneficial agreement, both would go on their separate ways. But that's not what will happen under the Inflation Reduction Act, which created this arrangement.

That bill sets the price ceiling of a selected drug from 25% to 60% of its list price. If a drug company wants to walk away, the law hits it with a daily excise tax that begins at 186% of the daily revenue generated by the drug. The tax eventually climbs to a staggering 1,900%.

That's not a negotiation. It's a stickup. What the Biden administration is looking to do is institute price caps on drug prices, disguised with rhetorical flourishes.

It's easy to predict what will happens next, especially if you're familiar with the long-term damage done by rent control. Drug companies will invest less in making new drugs. A University of Chicago study from November 2021 projected that 135 fewer drugs through 2039 would be brought to market because of this law. The study found that would cause a loss of 331.5 million life years in the U.S. For context, at the time of the study, COVID-19 had resulted in 10.7 million life years lost in this country.

This isn't mere conjecture. Economist Tomas Philipson, one of the study's co-authors, reported that at least two dozen drug companies have already pulled back on drug development because of this bill.

In response, pharmaceutical companies have sued. They argue that this scheme violates the "takings" clause of the Fifth Amendment. That prohibits the government from taking private property for "public use, without just compensation." Although how courts will rule is uncertain, that's obviously what's happening here.

Those who look forward to lifesaving medical breakthroughs should hope these lawsuits are successful.

(COMMENT, BELOW)

Previously:
• WARNING: Here's why top insurers are fleeing
• 'They even laughed in my face'
• Red states power Biden's economy
• 'If you have private insurance, you can' … OOPS!
• Ignoring the Bill of Rights when its convenient
• Hunter cops a plea --- but the Biden probes continue
• Will we every truly know the depth of pandemic fraud?
• Hello there, Big Brother! Please, come right in
• Its not perfect, but it's a start on immigration reform
• IRS wants to branch out
• Gas stove ban conspiracy theory comes true
• Biden's busy bureaucrats beef up regulatory state
• Don't even dare think of emulamating New Yawk!
• Where have all the nation's college students gone?
• Soft-on-crime policies hit hard wall of political reality
• Joe Biden and Monty Python is no comedy
• Global warming was supposed to wreak havoc on polar bears. Looks like someone forgot to tell the polar bears