New Drug Pricing Scheme Means More Government, Less Medicine

The Big Picture

As we rapidly approach the holiday season, Democrats are in a mad dash to see their high-spending Big Government Socialism Bill passed through Congress. A grab-bag of left-wing priorities, this tax and spend package rewards Nancy Pelosi’s political allies while leaving the American people in the dust.

The multi-trillion-dollar reconciliation package includes a drug pricing scheme that purports to make medicine more affordable but actually does the opposite. The new drug pricing provisions have a disproportionate impact on the generic and biosimilar markets, the very products that drive the cost of medication down.

The Details

  • Generic and brand medicines operate in two very different spaces. Whereas brand medicines enjoy a period of exclusivity to protect investments in research and development, generics and biosimilars operate in a competitive marketplace.
  1. The exclusive nature of brand medications spurs the very innovation that creates new treatments and improves healthcare quality.
  2. It is the competitive generic marketplace that ends up lowering costs and increasing access to life-saving drugs.
  • The Democrats’ drug pricing scheme has two extremely harmful components, medicare negotiation and an inflation penalty. Both provisions pose enormous problems for development and access to generics and biosimilars.
  • Direct price negotiation from Medicare undermines the development of biosimilars and generics. It creates a situation where forecasting the market for specific drugs becomes extremely difficult and discourages investment in the generic and biosimilar marketplace.
  • The competitive nature of generics creates substantial savings for patients and results in a dynamic landscape where manufacturers enter and exit the marketplace. Generics are far more sensitive to customer behavior, and their low cost makes any price change proportionally more significant than their brand counterparts. The result is a situation where an inflation penalty would disproportionately punish the products that reduce the cost of medication.

Why it Matters

Despite the policy’s intention of lowering treatment costs, the drug pricing proposals in the Democrats’ multi-trillion-dollar Big Government Socialism Bill disproportionately target the very products that lower costs. Discouraging investment and pushing products out of the market that would otherwise provide millions of Americans with access to effective and low-cost treatments is a recipe for disaster.

The price of something is not simply an arbitrary number that the government can forcibly change. Instead, price is the value placed on a product that results from market forces and human behavior. Although lowering the cost of medicine is a worthy goal, heavy-handed government policies are entirely the wrong way to go about it.

We should be embracing the development of new treatments and low-cost generics. Unfortunately, these policies are an attack on generics and biosimilars that will inevitably make treatments more expensive and scarce.