Biden-Harris Price Controls Causing Senior Drug Prices to Skyrocket

[Vambram]

Biden-Harris Price Controls Causing Senior Drug Prices to Skyrocket

The first group of impacted drugs includes ten medicines that have been selected to have a “maximum fair price” (MFP) set under the IRA.

www.dailysignal.com

A recent analysis warns that these pricing provisions will likely lead to higher costs for millions of seniors and disabled Americans who rely on Medicare Part D. This shouldn’t come as a surprise—price controls simply don’t work, and when they’re implemented, someone will eventually have to pick up the tab. Nor should it be surprising that government spending doesn’t reduce inflation. History shows quite the opposite.


The first group of impacted drugs includes ten medicines that have been selected to have a “maximum fair price” (MFP) set under the IRA. In 2024, Medicare beneficiaries typically pay fixed copays for most of these drugs. For millions of these beneficiaries, artificially fixed-drug costs will slow their progression toward their Part D out-of-pocket limit, making them pay more in out-of-pocket costs.

For low-income beneficiaries, the out-of-pocket cost increases are significant—averaging 27% more. Asian and black beneficiaries who rely on the medicines subject to an MFP could experience an average increase of 13% and 15%, respectively. As is too often the case, the most vulnerable among us will bear the brunt of bad policy.

As bad as this all is, it gets worse. The predictable impact of price controls on goods and services is a well-researched topic in economics. This makes the typical combination of good intentions and unintended consequences a tough excuse to swallow.

The question then becomes who knew what and when? Did HHS Secretary Xavier Becerra and Center for Medicare and Medicaid Services Administrator Chiquita Brooks-LaSure just fail to consider the impact of price controls on seniors’ prescription drugs? Government agencies rarely endorse legislation without conducting such forecasting, yet both Becerra and Brooks-LaSure were among the most vocal to endorse and boast about the IRA’s new price control mandate.

Expected impact of Inflation Reduction Act Medicare Drug Price Negotiation Program on Medicare Part D beneficiary out-of-pocket costs

We analyze the impact of the Inflation Reduction Act’s Medicare Drug Price Negotiation Program on Part D beneficiary out-of-pocket costs.

www.milliman.com

 

[iluvatar5150]

"Skyrocket" is an interesting choice of words not supported by report. Their expected impact of this policy is $11/yr for affected low-income individuals, and $104/yr for affected non-low-income individuals.

https://www.milliman.com/-/media/milliman/pdfs/2024-articles/6-25-24_expected-oop-cost-impact-drug-price-negotiation_summary.ashx?la=en&hash=FAE783DB2B66AF0568DF06602860D05E

 

[Arcangl86]

"Skyrocket" is an interesting choice of words not supported by report. Their expected impact of this policy is $11/yr for affected low-income individuals, and $104/yr for affected non-low-income individuals.
View attachment 354993

https://www.milliman.com/-/media/milliman/pdfs/2024-articles/6-25-24_expected-oop-cost-impact-drug-price-negotiation_summary.ashx?la=en&hash=FAE783DB2B66AF0568DF06602860D05E

They are having fun with percentages here. a 27% increase would be considered a sky rising increase if there were no further context. Also, I took a glance at the report. They are keeping their methodology pretty close to the vest. Which, combined with the fact that this study was commissioned by a pharma lobby makes me suspicious.
ETA: I want to be clear that I expect the methodology to be clean and hold up to proper mathematical rigor. I also expect them to have intentionally incorporated the most pessimistic assumptions they could into the model.

 

[Laodicean60]

The predictable impact of price controls on goods and services is a well-researched topic in economics.

I'll have to take the Federal Reserve's word for the issues with price controls.

 

[RocksInMyHead]

For millions of these beneficiaries, artificially fixed-drug costs will slow their progression toward their Part D out-of-pocket limit, making them pay more in out-of-pocket costs.

Then perhaps the out-of-pocket limits need to be adjusted? That would make sense if they were originally set based on the old drug prices.

 

[RocksInMyHead]

I'll have to take the Federal Reserve's word for the issues with price controls.

From the final section of the linked article:

Economists do know, however, that price controls can be theoretically beneficial when imposed appropriately on a monopolist or monopsonist, and they do tend to work better in imperfectly competitive markets. The economist Hugh Rockoff cautiously suggests a limited role for price controls during some inflation episodes in his book Drastic Measures: A History of Wage and Price Controls in the United States. Rockhoff reported that even the late Milton Friedman, a noted free-market advocate, accepted a limited role for temporary price controls in breaking inflation expectations during a disinflation.

(A monopsomy is a market condition in which there is only one buyer, rather than one seller). Medicare and drugs in general fit into this category of an "imperfectly competitive market." We have a monopsomy (Medicare being the sole purchaser), a partial monopoly (frequently, generic options aren't available for certain drugs), and a situation in which demand isn't really elastic - if the drug company decides to hike the price of insulin, for example, people can't just stop buying it.

In other words, this is exactly the sort of scenario in which the Fed says that price controls are beneficial.

 

[Laodicean60]

(A monopsomy is a market condition in which there is only one buyer, rather than one seller). Medicare and drugs in general fit into this category of an "imperfectly competitive market." We have a monopsomy (Medicare being the sole purchaser), a partial monopoly (frequently, generic options aren't available for certain drugs), and a situation in which demand isn't really elastic - if the drug company decides to hike the price of insulin, for example, people can't just stop buying it.

In other words, this is exactly the sort of scenario in which the Fed says that price controls are beneficial.

Don't we also have insurance?

 

[RocksInMyHead]

Don't we also have insurance?

The price controls only apply to drugs purchased by Medicare, so insurance is irrelevant.

 

[RocksInMyHead]

Details of what the plan actually does here: Explaining the Prescription Drug Provisions in the Inflation Reduction Act | KFF

 

[CRAZY_CAT_WOMAN]

My mom's lifesaving pills cost a $1. 50 cents or less. It might be because she lives in CA. In CA she has access to Medicare, medical and other free/cheap insurance. When she was a baby, she had Polio and measles, that cause encephalitis, cerebral palsy and seizures. And because of where she lived, she was able to get free services. And cheap medicine. I don't believe you're getting true info. Medical wise I would never trust Trump or Conservatives.

 

[Laodicean60]

Details of what the plan actually does here: Explaining the Prescription Drug Provisions in the Inflation Reduction Act | KFF

Informative and it works for me since I'm on Medicare but knowing the greed of companies it makes me wonder if the ones on private insurance will have to absorb the costs. I guess time will tell.

 

[RocksInMyHead]

Informative and it works for me since I'm on Medicare but knowing the greed of companies it makes me wonder if the ones on private insurance will have to absorb the costs. I guess time will tell.

Private insurance companies are already free to negotiate with pharmaceutical companies and medical providers - they almost never pay out the full amount that you would be billed for out-of-pocket. Until this year, Medicare was legally prevented from doing that - now they're able to negotiate in limited and highly specific cases.