Senate Democrats taking steps toward socialized medicine

It's been less than a year since Democrats enacted the Inflation Reduction Act, which gives Medicare the power to set the prices of certain medicines.

Those price controls have yet to go into effect. But Democrats already want more. They've introduced new legislation in both chambers of Congress that would amp up those price controls — and even permit the government to refuse to cover drugs in order to drive a harder bargain with pharmaceutical companies. They say their bills would "build on" the IRA.

That law, which President Biden signed last August, subjects 10 medicines to price controls under Medicare in January 2026. The government will set the prices for 15 more in 2027, another 15 in 2028, and 20 more per year in 2029 and beyond.

The SMART Prices Act would take things even further. It would empower Medicare to set prices for 20 drugs in 2026, instead of the current ten under the IRA. In 2027 and every year after, that number would jump to 40 — many more than the IRA stipulated. The House bill is even more radical — extending Medicare's price controls to the private insurance market.

The SMART Prices Act would also subject medicines to price controls five years after approval by the Food and Drug Administration. That's up to eight years quicker than under the IRA and significantly sooner than when generic or biosimilar competitors can enter the market.

This provision would gut the generics industry. Generic firms face substantial upfront costs. They recapture those investments by underpricing their wares relative to branded drugs and capturing a small margin on each sale. Patients, of course, benefit from those lower prices.

But if Washington sets a rock-bottom price on a brand-name drug, there will be no incentive for a generics manufacturer to enter the market.

That's problematic for several reasons. For starters, the government's mandated price may not be as low as a competitive market could generate. So patients may end up paying more than they should.

Further, a market without competing drug makers is less resilient. If price controls result in a branded company being the only producer of a drug, then a production issue could render a drug that patients need inaccessible.

The IRA's price controls have already led a number of pharmaceutical companies to curtail research into new drugs.

In May, the CEO of Novartis announced that the company would drop a few cancer drugs from its development pipeline. Alnylam cited the IRA when it put development of a rare eye disease drug on hiatus last fall.

How can Democrats look at this decline in drug research and decide more price controls are an appropriate response? Patients will pay the price for this misguided approach.