History shows that excessive government intervention in the free market can stifle innovation and leave consumers—and sometimes patients—to shoulder the consequences. Still, policymakers continue to fall for the trap. A recent example is government price controls levied onto medicine accessed through Medicare.
The policy poses a significant threat to patient health. Bipartisan proposals exist that will help make the best of a bad situation.
The trouble stems from the Inflation Reduction Act (IRA). The federal legislation—passed in 2022—attempts to address everything from climate change and energy security to funding the IRS. Of big concern among the medical community are provisions that grant the Department of Health and Human Services the authority to cap the price the government pays to acquire certain drugs for Medicare recipients.
Of course, we should find ways to help patients obtain their needed prescription drugs, but when Congress writes these omnibus bills that include healthcare, the losers are usually the patients. Anyone who has taken a basic economics class can predict how it could backfire.
Conceiving, developing, and testing a novel medicine is extremely capital intensive. This is followed by an extensive regulatory process before the medication hits the market. In fact, it’s estimated that bringing a new drug to market costs upwards of $4.5 billion and can take more than a decade to reach the patient.
When the opportunity to recoup these huge investments is handicapped by the government, fewer manufacturers will inevitably participate in the market and healthcare innovation will be curtailed. As a result of picking winners and losers, the price of selected drugs could be artificially lower, but the ability to access proper drugs in the future is jeopardized.
Given current political realities, outright repeal of this wrongheaded policy is a nonstarter. However, lawmakers and agency regulators shouldn’t sit on their hands. There are opportunities to tweak the law at the margins to help mitigate reduced patient access.
First, buried deep in IRA provisions are arbitrary timelines for when the regulations apply to biological drugs versus small molecule drugs. The former is exempt from the government manipulation for 13-years after approval from the Food and Drug Administration (FDA) while the latter only has a nine-year period before Uncle Sam steps in.
The disparity acts as a de facto penalty for manufacturers, investors, and research labs that are pursuing innovations within the small molecule space.
In practice, the policy will have a chilling effect on breakthroughs in this category of medication, which often encompasses oncology therapies because of its unique ability to penetrate cancerous cells. According to an analysis by the University of Chicago, the federal price manipulations will result in 200 fewer small molecule treatments developed over the next two decades.
A bipartisan group of lawmakers in Washington has proposed the Ensuring Pathways to Innovative Cures (EPIC) Act—legislation that would address the imbalance created by the IRA. It would provide equal footing for different classes of prescription drugs by standardizing the period in which drugmakers are exempt from government puppet strings.
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In parallel, officials at HHS should also give practicing clinicians a bigger seat at the table when decisions regarding government price controls are being made. Having been a member of a National Institute of Health (NIH) panel, I can attest to the value of clinicians such as myself focusing attention on everyday patient care.
Currently, healthcare professionals who possess real-world experience and best understand the system are nearly sidelined from the process. It is wishful thinking to believe government bureaucrats can successfully navigate a complex web of patient incentives, drug market dynamics, and, most importantly, patient care without leadership from clinical professionals.
While attempts by Democrats to lower health costs are admirable, the approach has created a regulatory quagmire that risks stymying innovation and limiting access to lifesaving medicines for patients. Common sense tweaks to the IRA that enjoy bipartisan support can make fallout from the price control ordeal incrementally more tolerable.
Joel Strom is the former President of the California State Dental Board, and a general dentist in the Los Angeles area.