The Drug Pricing ‘Slippery Slope’ Rep. Peter Welch breaks the code on the Senate’s new price controls

August 2022 Vol 13, No 8



Progressives are disappointed with the tentative drug-pricing deal that Senate Majority Leader Chuck Schumer appears to have struck with West Virginia’s Joe Manchin. But no worries, says Vermont Rep. Peter Welch, the price controls are merely the start of what will be a long raid on drug makers to fund Democratic spending ambitions.

The Senate drug agreement would require the Health and Human Services Secretary to “negotiate” prices for 10 of the top-spending drugs in Medicare starting next year and 20 by the end of the decade. If drug makers don’t accept the government’s offered price, they would get slapped with a 95% excise tax on their sales. Take his offer or else.

These sham negotiations would for now be restricted to small-molecule drugs that have been approved by the Food and Drug Administration for at least nine years and biologics that have been on the market for 13. A Kaiser Family Foundation analysis finds the price controls would nonetheless apply to most of Medicare’s top-spending drugs.

Yet progressives are upset—when are they ever happy?—that the deal doesn’t give the secretary carte blanche authority to impose price controls for all drugs. This would be tantamount to dropping a nuclear bomb on the U.S. pharmaceutical industry, which would cause immediate and widespread collateral damage.

Now Mr. Welch is trying to console his fellow progressives who couldn’t get moderate Senate Democrats to blow up the industry all at once. “Don’t underestimate the power of the slippery slope. That’s exactly why pharma fights so hard. They know if we get price negotiation, it’s the beginning, it’s not the end,” he told StatNews.

On the politics, Mr. Welch is surely right. Once the negotiation process is established, it will be far easier for Democrats to expand the list of covered medicines to meet whatever their next spending goal is. This time around Democrats plan to use the $200 billion or so in drug savings to extend sweetened Affordable Care Act (ACA) subsidies for three years and cap Medicare Part D out-of-pocket costs at $2,000.

But there will always be another spending ambition, and pharma will be a ready bank to tap. Three years from now, Democrats will no doubt look to drug makers to pay for another ACA subsidy extension and who knows what else. The slippery slope, once established, will get slipperier, and American drug innovation will be the poorer for it. g

Reprinted by permission of the Wall Street Journal, Copyright © 2022 Dow Jones & Company, Inc. All Rights Reserved Worldwide. License number 5357820957390.

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Last modified: August 10, 2023

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