Price Controls Shouldn’t Be Legislated by Congress
TL/DR –
The Trump administration’s aggressive stance against foreign free riding, including through executive action and voluntary agreements with 17 major pharmaceutical manufacturers, has been applauded by Jack Kalavritinos, founder of the Washington Health Innovation Council. However, Kalavritinos warns against Congress enshrining price controls into law, suggesting it could distort markets, harm innovation and fail patients. He points to the Inflation Reduction Act, which he says has led to investment in treatments collapsing, clinical research slowing, and patients not seeing promised relief, and argues for targeted reforms instead, including reforming pharmacy benefit managers, strengthening the 340B program, and using trade tools to pressure allies to pay their share.
“`html
Analysis: Trump’s Aggressive Stance on Lowering Drug Prices Garners Support
President Trump’s commitment to delivering on his MAHA healthcare plan, which includes a strong focus on lowering drug prices for American patients, has been met with considerable support. As a veteran of the first Trump administration at Health and Human Services, I am among those who commend the president’s assertive efforts against what he calls “foreign free riding”.
Impact of Trump’s Policies on Pharmaceutical Industry
Through executive action and voluntary contracts with 17 key pharmaceutical manufacturers, which cover 86% of the branded drug market, the administration has attained promises to align U.S. prices more closely with international rates. These commitments are tied to relief from new pharmaceutical tariffs linked to domestic manufacturing. These strides are built upon the triumphs of Trump’s first term in office, such as insulin price caps and initiatives to stimulate competition.
However, it is critical that Congress does not translate these temporary price controls into permanent legislation. The lessons learned from the Inflation Reduction Act (IRA) make it clear that such policies can distort markets, hamper innovation, and ultimately fail the patients they were designed to benefit. Instead, policymakers should focus on targeted reforms that directly address the root causes of high out-of-pocket costs, without jeopardizing the development of new treatments.
The Inflation Reduction Act: A Cautionary Tale
The IRA, enacted in 2022 as a large-scale experiment in setting prices for Medicare drugs, serves as a cautionary tale. Three main failures of this law should make lawmakers stop and think.
Firstly, it has led to a significant decline in the funding of groundbreaking treatments. Since its inception, early-stage R&D funding for small-molecule drugs, which are budget-friendly, easy-to-take pills used to treat a wide range of illnesses, has dropped by almost 70%. For diseases that heavily impact Medicare patients, such as Alzheimer’s, heart failure, and various types of cancer, median investment has decreased by 74%.
Secondly, the rate of clinical research has slowed dramatically. The number of new clinical trial starts for unapproved small-molecule medicines has fallen by 25% post-IRA, while trials exploring new applications for existing medications have decreased by 30 to 45%.
Lastly, the promise of patient relief has not been fulfilled. Despite the IRA’s promises of affordable prices, standalone Medicare Part D premiums are projected to rise by 32% for 2026, with plan choices predicted to be 22% less. Moreover, only 11% of non-low-income beneficiaries will spend less per prescription under government-imposed prices.
Alternative Approaches to Lowering Drug Prices
Thankfully, there are other, more innovation-friendly strategies that align with President Trump’s track record. Policymakers should consider reforms to pharmacy benefit managers, whose opaque rebate systems and spread pricing unnecessarily inflate list prices while patients pay more at the pharmacy counter. Strengthening the 340B program’s integrity would limit hospital markups that drive up costs without benefiting uninsured patients. Furthermore, the administration’s trade tools can be expanded without imposing domestic price caps, pressuring allies to pay their fair share and helping to lower out-of-pocket expenses.
President Trump has already brought about significant relief to American patients through these voluntary deals, and the potential for further progress lies in securing stronger trade agreements with major nations such as Germany, France, Italy, and Japan. Rejecting price controls and focusing on reforms that reduce prices for patients today while safeguarding the cures of tomorrow is the path Congress should take. The future of U.S. medical innovation and the well-being of American patients depend on it.
The article is authored by Jack Kalavritinos, the founder of the Washington Health Innovation Council who previously served in the Trump 45 and Bush 43 Administrations, at the FDA, HHS Office of the Secretary and the White House.
“`
—
Read More US Economic News