In his State of the Union address, President Biden touted the drug-price controls in his Inflation Reduction Act (IRA). Though the price controls have yet to take effect, Biden proposed expanding these measures, which threaten to destroy pharmaceutical innovation and harm the nation’s health.
The IRA’s drug-price controls are a solution in search of a problem. Two years ago, the Congressional Budget Office (CBO) found that per capita prescription-drug spending in real terms had fallen as a percentage of total spending on health care since the mid-2000s. Retail prescription drug prices have gone up at a slower rate than have hospital prices and health-care prices generally. According to researchers at the health-care data group IQVIA, U.S. drug spending is lower as a percentage of national health expenditures than the average drug-spending share across 11 developed countries.
While price-control proponents focus on drugs’ high list prices, the average net price of a prescription—the amount that users actually paid after subtracting manufacturers’ discounts and rebates—has been falling, according to CBO. This reflects the increased use of generic drugs, which cost far less than name-brand pharmaceuticals and now account for nine out of ten prescriptions.
