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The Trump administration is experiencing some cognitive dissonance: The new president’s Justice Department is going to bat for former President Joe Biden and his signature legislative accomplishment.
Senior Justice officials say they’ll head to court to stick up for Biden’s Inflation Reduction Act and its price controls on prescription drugs.
Meanwhile, the White House’s top health-care policymakers warn that those very price controls will kill American patients, undermine our economy and ultimately increase government health-care spending.
“IRA price negotiations and controls will lead to fewer life-saving drugs coming to market,” cautions Dr. Joel Zinberg, a special assistant to the president at the National Economic Council.
Theo Merkel, a special assistant to the president at the Domestic Policy Council, has testified to Congress that under the price controls “everyone agrees that there will be some reduction in future innovation” — and that the economic and human costs of “future disease that does not get cured” will be high.
The health wonks are right. The rest of the Trump administration would be wise to listen — and neuter the Inflation Reduction Act to the greatest extent possible.
There are far better ways to make drugs more affordable.
The IRA Act gave Medicare the power to set prices for drugs the program covers, starting with 10 medicines under the Part D prescription drug benefit in 2026. Fifteen more under Part D will be hit with price controls in 2027.
In 2028, 15 drugs across Part D and Part B, which covers drugs dispensed in-clinic, will be subject to price caps. And starting in 2029, Medicare will apply price controls to 20 more drugs across both programs each year.
The problem with price controls is that they upend the economics of developing new pharmaceuticals: When the government caps the price of a breakthrough medicine, it limits investors’ ability to recoup their costs and make a return.
The incentive to invest in drug development disappears.
As a result, fewer drugs will reach patients. A Vital Transformation study estimated that the IRA’s drug-pricing provisions will lead to 139 fewer new drugs over the next decade.
That’s bad news for patients hoping for medical breakthroughs.
Price controls will also discourage companies from launching their drugs in the United States — and make it harder for patients to access medicines that are already on the market.
Consider what has happened in the UK, which requires companies to sell their medications at a “competitive” price to be included on the government-run health system’s formulary, or list of covered medicines.
That doesn’t exactly encourage manufacturers to hurry up and launch their medicines in Britain. So many don’t.
As a result, Britons wait longer for medicines that US patients are already taking. A RAND analysis found that about three-quarters of the drugs launched worldwide from 2018 to 2022 were available in the United States by the end of that period — but just 43% were available in the UK.
The availability of cutting-edge medications determines whether many patients survive their illnesses.
The American Cancer Society cites new life-saving medicines as a major reason the US cancer death rate fell 33% between 1991 and 2023. By comparison, the UK’s cancer death rate has fallen just 19% since the early 1970s.
The Trump administration need not import these problems into the United States. Other reforms can lower the costs of prescription drugs and make them easier to access.
Start by taking a hard look at pharmacy benefit managers. Insurers hire PBMs to negotiate lower drug prices with manufacturers in exchange for favorable placement on a health plan’s formulary.
However, PBM compensation is generally tied to the size of the discounts they negotiate relative to a drug’s list price, creating a perverse incentive for PBMs to favor higher-cost drugs with larger discounts.
Because patients’ cost-sharing is based on list prices — not the steeply discounted negotiated prices, which are kept secret — consumers end up paying more at the pharmacy counter.
De-linking PBM revenue from the size of the discounts they secure — and instead requiring them to charge a flat fee — would go a long way toward reducing the cost to patients.
Defending price controls in court, while simultaneously warning of their deadly consequences, is like pouring gasoline on a blaze and then complaining about the heat.
It’s time for the Trump administration to put out the fire.
Sally C. Pipes is president and CEO of the Pacific Research Institute and author of “The World’s Medicine Chest.” X @sallypipes