The Biden administration marked the second anniversary of the Inflation Reduction Act (IRA) by touting the results of its first round of “negotiations” with pharmaceutical manufacturers. According to the administration, Medicare will save an estimated $6 billion on prescription drugs in 2026, with seniors saving an additional $1.5 billion in out-of-pocket costs. However, a closer examination of the process reveals that these “negotiations” were far from fair.
The government imposed price controls on pharmaceutical manufacturers, with companies that refused to participate facing exorbitant taxes of up to 1,900 percent of the revenue of the products in question or being forced out of the Medicare and Medicaid programs entirely. This coercive approach undermines the notion of genuine negotiation, instead resembling a hostage situation where companies are forced to comply with the government’s demands.
Moreover, the administration’s claims of Medicare savings are misleading. The Congressional Budget Office found that the IRA cut Medicare spending by a net $254.8 billion, but this money was not reinvested in the program. Instead, it was diverted to fund other projects, including climate initiatives and the hiring of 87,000 new Internal Revenue Service employees to audit taxpayers, including seniors.
This raid on Medicare funds is not an isolated incident. Democrats have a history of using the program as a slush fund to finance other government spending initiatives. This approach not only harms seniors but also undermines the long-term solvency of the Medicare program.
In a separate development, the Biden administration recently announced a “demonstration project” to bail out insurers facing premium hikes due to changes resulting from the IRA. This bailout is expected to cost $5 billion this year, effectively wiping out the supposed “savings” from the drug “negotiations.” The project is scheduled to last two years, with estimated costs potentially reaching $15 billion or more.
The IRA’s price controls will also have a devastating impact on pharmaceutical research and development. Companies will be less incentivized to invest in new treatments, leading to a decline in the number of new drugs being developed. Estimates suggest that the IRA’s provisions could result in over a dozen fewer drugs being created, with some independent estimates putting the number at over 100.
The consequences of the IRA’s price controls will be far-reaching, with Americans paying the price for years to come. The administration’s claims of “free” savings are nothing more than a myth, as the true cost of the IRA will be measured in lives lost and treatments never developed.
