In his State of the Union address on Tuesday, President Joe Biden touted how the misnamed Inflation Adjustment Act (IRA) will further warp medical care costs by “finally giving Medicare the power to negotiate drug prices.” The result is essentially putting price controls on prescription drugs. And price controls will do for prescription drugs what they do for all other products upon which they are imposed: create shortages, queues, black markets, and rationing.
Even worse, drug price controls will have the additional baleful effect of increasing disease, disability, and deaths while simultaneously raising the total costs of health care. How? Because price controls substantially reduce the incentives for pharmaceutical and biotechnology companies to research, develop, and deploy innovative new medicines that would prevent and cure illnesses and cut overall costs.
These are the conclusions of a November 2021 study by the University of Chicago economist Tomas J. Philipson and his colleagues that analyzed the impact of the IRA on biopharmaceutical innovation and patient health.
[It should be the obvious conclusion of practical experience, too. In the same speech, Biden insisted that he would promote American innovation and manufacturing. These policies do the exact opposite in one industry that still mainly innovates domestically and substantially manufactures in the US as well. Biden is as incoherent as always, policy-wise. — Ed]
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