Smoke & Mirrors Medicare Price Controls

One of the remarkable deflections in the Biden-Harris price controls on Big Pharma is that it will reduce generic competition, which would SAVE consumers even more.

So opined the WSJ editorial board recently and they left little doubt at what they thought of the Medicare scheme: “Democrats … boasted about saving seniors & taxpayers tens of billions of dollars on drug costs. Talk about deceptive advertising. The ‘savings’ will be much less in practice & price fixing could result in higher costs over time owing to less competition to Big Pharma from generic drugs.”

What the pols won’t tell us, but the editors did, is that the Medicare prices supposedly “agreed to” during the Inflation Reduction Act’s first round of “negotiations” were actually misleading at best. “In reality,” the op ed says, “companies had to accept the government’s dictated price since the alternative is an excise tax that climbs to 1,900% of a medicine’s daily revenue. Meanwhile, they add, “Discounts for the first 10 medicines selected by the Centers for Medicare & Medicaid Services range between 38% & 79% off their list price. Actual savings are much smaller since insurers already negotiate rebates in return for favorable placement on insurance formularies. CMS estimates the price controls will lower costs [on those 10 selected drugs] by a net 22%.” In contrast, the WSJ argues, “a new generic saves 39% on average and 54%” when a company introduces two generics simultaneously and 79% with four and 95% with five or more. This smoke & mirrors Medicare price controlling, then, is arguably a regressive rather than progressive policy.

Davd Soul