Drug price controls in Biden’s proposed budget hurtful for patients, R&D

The 2024 budget proposal President Biden officially released yesterday is facing rocky ground ahead calling for, among other things, more innovation-killing drug price controls under the veil of extending the life of Medicare’s hospital trust fund.

The proposed changes will not only reduce the time drugs can sell at market prices before price controls (currently nine years for small-molecule drugs and 13 for biologics), but will also quadruple the number of drugs eligible for price controls annually—from 10 to as many as 40.

In a change in what the White House’s fact sheet calls “wasteful spending on Big Pharma,” the budget plans to build on the IRA to extend to the commercial market penalties that drug makers have to pay to Medicare if prices rise faster than inflation.

Chart the showing trend of number of drugs to face government negotiation from 2026 to 2033. Biden proposes doubling Medicare's negotiating power.

House Republicans argue that there must be major cuts in the spending plan, and some want to undo price controls established in the Inflation Reduction Act (IRA), which passed last year with only Democratic votes. No Republicans voted for it.

Republican Sen. Mike Lee remarked at the time that “price controls never work” and that IRA-imposed “mandating of fixed prescription drug prices will ultimately result in the shortening of American lives.”

Costly blow to patients depending on innovative drugs

And that’s not where the damage ends. Although no one expects this budget to pass, the mere mention of drug price controls and price negotiations could scare off investment into new treatments, increasing the uncertainty around future returns on today’s R&D.

That may ultimately make some investments too risky, experts argue.

The Biotechnology Innovation Organization (BIO) Chief Advocacy Officer Nick Shipley emphasizes that the proposed increased price controls would be “another costly blow to the millions of patients depending on innovative cures.”

What the White House is proposing, according to him, is “to further destabilize Medicare, slow critical investment in future research and development, stall drug innovation, and ultimately harm patients.”

“It is a strong signal to the innovative drug industry that there is just no support for further innovations and cures moving forward,” adds BIO’s Chief Policy Officer, John Murphy III, which will result in disincentivizing new drugs.

While describing the latest budget proposal as “an attack on medical innovation and American patients,” Shipley reiterates that “BIO will continue to work alongside the current administration and lawmakers to find real policy solutions that help patients access innovative treatments.”

Commenting on the proposal, American Enterprise Institute senior fellow Ben Ippolito points out that “the wide latitude that the law gives to the HHS secretary to negotiate prices—without a price floor—has already injected uncertainty into drugmakers and investors’ projections.”

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