Trump Challenges Biden’s Drug Pricing Policies — Patients Will Bear the Cost

The Trump administration is facing a conflict of interest: The Justice Department under the new president is supporting former President Joe Biden’s key legislative achievement.

Top officials at the Justice Department have announced plans to defend Biden’s Inflation Reduction Act and its controls on prescription drug prices.

On the other hand, senior health-care officials at the White House have cautioned that these price controls could harm American patients, disrupt the economy, and possibly lead to increased government spending on health care.

Dr. Joel Zinberg, a special assistant to the president at the National Economic Council, warns, “Price negotiations and controls from the IRA will result in fewer life-saving medications entering the marketplace.”

Theo Merkel, another special assistant to the president from the Domestic Policy Council, testified before Congress that the price controls will inevitably reduce future innovation in pharmaceuticals, consequently raising the costs associated with “future diseases that go uncured.”

The insights from health experts must be heeded by the rest of the Trump administration, which should work to limit the impact of the Inflation Reduction Act as much as possible.

There are significantly better methods to make medications more affordable.

The IRA grants Medicare the authority to set prices for medications covered by the program, commencing with 10 specific drugs under the Part D benefit in 2026. Eleven additional drugs will be subject to price controls in 2027.

By 2028, 15 drugs across Part D and Part B will face price caps, with Medicare enforcing price controls for 20 more drugs each year beginning in 2029.

The core issue with price controls is that they distort the financial dynamics of developing new drugs: Government-imposed caps on the prices of innovative treatments hinder the ability of investors to recover their expenditures and earn a profit.

This diminishes the motivation to invest in drug research and development.

Consequently, a lower number of drugs will become available to patients. A study by Vital Transformation estimates that the IRA’s provisions related to drug pricing could result in 139 fewer new drugs being released over the next decade.

This is detrimental for patients looking forward to advancements in medical treatment.

Moreover, price controls may discourage firms from introducing their products in the United States and complicate access for patients to existing medicines.

For example, in the UK, companies must offer their products at a “competitive” price to be included in the government-run health system’s list of covered drugs.

This does not incentivize manufacturers to expedite the launch of new medications in Britain, resulting in many opting out.

This leads to delays for British patients seeking treatments that their American counterparts have already accessed. A RAND analysis revealed that around three-quarters of medicines launched globally from 2018 to 2022 were available in the U.S. by the end of that period, whereas only 43% were available in the UK.

The availability of advanced medications can be crucial for patient survival.

The American Cancer Society attributes the decrease in the U.S. cancer death rate by 33% between 1991 and 2023 to the introduction of new life-saving treatments. In contrast, the UK has only seen a 19% decline in cancer death rates since the early 1970s.

The Trump administration should avoid importing these challenges into the United States. Alternative reforms can effectively lower prescription drug costs and enhance access.

A thorough examination of pharmacy benefit managers (PBMs) is a good starting point. Insurers employ PBMs to negotiate reduced prices for medications with manufacturers in return for favorable positioning on health plans’ formularies.

However, PBM compensation is mostly linked to the extent of the discounts they negotiate based on a drug’s list price, creating an undesirable incentive to prefer more expensive drugs that offer larger discounts.

This arrangement forces patients to pay more out of pocket since their cost-sharing is based on list prices—rather than the concealed, sharply discounted prices resulting from negotiations.

Decoupling PBM earnings from the scale of the discounts achieved and instead implementing a flat fee structure would significantly reduce costs for patients.

Defending price controls in court while simultaneously cautioning about their harmful effects is akin to dousing a fire with gasoline and then complaining about the inferno.

It’s crucial for the Trump administration to extinguish the flames.

Sally C. Pipes is the president and CEO of the Pacific Research Institute and author of “The World’s Medicine Chest.” X @sallypipes