By Tomas J. Philipson
Democrats are looking for ways to finance their $3.5 trillion reconciliation bill and one plan is to put price controls on prescription drugs. If enacted, these policies would harm patients enormously. Far from saving money, price controls would make better health more expensive.
The Biden White House has proposed requiring Medicare to “negotiate” drug prices. Companies face a tax as high as 95% on sales if they don’t concede to the government price, meaning this isn’t a negotiation but a demand. Drug companies would have to offer commercial insurers the same rates. The plan would also tie price increases to inflation, which will only translate to higher prices for drugs at launch.
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