Progressives are disappointed with the tentative deal on drug prices that Senate Majority Leader Chuck Schumer appears to have reached with Joe Manchin of West Virginia. But don’t worry, says Vermont Rep. Peter Welch, the price controls are just the start of what will be a long raid on drugmakers to fund Democrats’ spending ambitions.
The Senate drug deal would require the Secretary of Health and Human Services to “negotiate” prices for 10 of Medicare’s highest-spending drugs starting next year and 20 by the end of the year. decade. If drug manufacturers did not accept the price offered by the government, they would face a 95% excise tax on their sales. Accept his offer or else.
These sham negotiations would for now be limited to small molecule drugs that have been approved by the Food and Drug Administration for at least nine years and biologics that have been on the market for 13 years. An analysis from the Kaiser Family Foundation reveals that price controls would nonetheless apply to most of Medicare’s highest-spending drugs.
Yet progressives are upset – when are they ever happy? – that the agreement does not give the secretary carte blanche power to impose price controls on all drugs. This would be tantamount to dropping a nuclear bomb on the American pharmaceutical industry, which would cause immediate and widespread collateral damage.
Now Mr. Welch is trying to console fellow progressives who failed to convince moderate Senate Democrats to blow up the industry in one fell swoop. “Don’t underestimate the power of the slippery slope. This is exactly why pharma is fighting so hard. They know if we get a price negotiation, it’s the beginning, it’s not the end,” he told StatNews.
Politically, Mr. Welch is surely right. Once the negotiation process is established, it will be much easier for Democrats to expand the list of covered drugs to meet whatever their next spending goal is. This time around, Democrats plan to use the roughly $200 billion in drug savings to extend Affordable Care Act (ACA) subsidies for three years and cap Medicare Part D out-of-pocket costs at $2,000.
But there will always be another spending ambition, and pharma will be a bank ready to exploit. Three years from now, Democrats will no doubt be looking to drugmakers to pay for another ACA grant extension and who knows what else. The slippery slope, once established, will become more slippery, and American pharmaceutical innovation will be poorer.
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Appeared in the July 28, 2022 print edition as “The Drug Price ‘Slippery Slope'”.