High Costs of HHS Price Controls: Rationing Meds and Choking U.S. Innovation

Brad Watts
Vice President, Patents and Innovation Policy, Global Innovation Policy Center (GIPC), U.S. Chamber of Commerce

Katie Mahoney
Former Vice President, Health Policy, U.S. Chamber of Commerce

Published

August 29, 2023

The Department of Health and Human Services is expected to announce this week an initial group of medicines on which it will impose unprecedented government price controls under the so-called drug-price negotiation provisions of the Inflation Reduction Act (IRA). These statutory provisions violate the U.S. Constitution, and the U.S. Chamber has challenged them in federal court.

Let’s be clear: This isn’t a negotiation. Instead, the Biden administration has resorted to coercive price controls for medicines, thus jeopardizing future medical discoveries and putting Americans’ health care on a rationing trajectory. As in other countries where such policies have been tried and failed, U.S. government price controls will cause American patients to lose access to new treatments and face lengthy delays.

A Crushing Blow for Revolutionary Therapies and Cures

Under the federal government’s new Medicare Drug Price Negotiation Program, manufacturers of 10 families of medicines—set to increase to 80 by 2030—are forced to either (1) accept the government’s unilaterally selected prices or (2) face crippling financial penalties in the form of an “excise tax” of up to 1900%. The prices or penalties will continue unless a manufacturer removes all its products from Medicare, one of the largest health care markets in the world. This would be devastating for Medicare patients as well as for manufacturers, as we have explained.

Hurts Patients, Innovation, and Jobs: Recent forecasts reveal the potential harm of these price controls on American patients and workers:¹

Over 130 potential therapies might not be developed in the next decade.
Had these controls been in place in 2014, between 24 and 49 therapies available today might never have been introduced.
The IRA may reduce innovation in both groundbreaking drugs and mainstream treatments especially for seniors .²

The IRA could slash U.S. product launches by a staggering 29% to 44%.
The U.S. faces a potential loss of up to 812,900 jobs—both direct and indirect—due to these changes.

Fact: Government Price Controls Lead to Rationing and Delayed Treatments

Soon, Americans will experience what other countries with government price controls experience—rationed medicines and delayed treatments. U.S. Chamber of Commerce research reveals that patients in other developed nations wait up to 500 days longer than Americans for new treatments.

Case Studies: Just look at the harm inflicted on patients in other countries following the adoption and implementation of similar price controls.

Owing to the U.K.’s Department of Health and Social Care (DHSC) drug cost cuts and a 26.5% mandatory rebate on branded items, from 2012 to 2021 only 38% of new medications reached U.K. patients within one year of global first launch, compared to 78% in the U.S.³

The U.K. lagged for years without access to breakthrough cystic fibrosis therapies.⁴
Of the 104 new medicines launched globally since 2017, only 56% debuted in major European countries, whereas the U.S. saw access to 80%.
Price controls are dampening investments elsewhere, especially in Germany, France, and Italy. Several companies have even halted developing groundbreaking gene therapies for rare diseases.⁵

Bottom Line: Government price controls hurt, not help, access to vital medicines, and price controls are both legally suspect and counterproductive. The Chamber champions every American’s access to essential medicines. Ironically, HHS’ announcement is a further step toward restricting the very access that HHS aims to improve.

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Patient Access Report

About the authors

Brad Watts

Brad Watts is the Vice President for Patents and Innovation Policy at the U.S. Chamber of Commerce's Global Innovation Policy Center (GIPC). He works with U.S. Chamber members to foster a political, legal, and economic environment where innovators and creators can invest in the next big thing for the benefit of Americans and the world.