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The Law of Unintended Consequences Can’t Be Repealed

Posted on Wednesday, August 30, 2023
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by Outside Contributor
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Medicare part D papers

This week, the Biden administration announced that Medicare would name some 10 prescription drugs it would subject to direct price negotiations. The drugs include Jardiance (diabetes), Entresto (heart failure), Imbruvica (blood cancer) and Stelara (psoriasis). If the companies that created the drugs refuse to kowtow to Medicare, they will be forced to withdraw from Medicare and Medicaid coverage or face a 95% excise tax.

The White House celebrated the decision as a win for taxpayers: after all, they pointed out, the 10 selected drugs were responsible for one-fifth of all Medicare Part D prescription costs between June 1, 2022, and May 31, 2023. “There is no reason,” Biden said in a statement, “why Americans should be forced to pay more than any developed nation for life-saving prescriptions just to pad Big Pharma’s pockets.”

Of course, that’s not what’s really happening.

First off, drug development is unbelievably expensive. In 2019 alone, the pharmaceutical industry spent $83 billion on research and development. According to a 2020 study, which covered some 632 new therapeutic drugs and biologic agents approved by the FDA, the “estimated median capitalized research and development cost per product was $985 million, counting expenditures on failed trials.” The average cost was $1.3 billion (some drugs are much more expensive to develop than others). According to the National Institutes of Health, the success rate of drug development is just 10 to 15 percent.

Americans bear the brunt of this cost – largely because other countries free ride. But Americans also capture the industry upside of drug development in the United States. This is why, according to one 2010 study, the United States accounted for “42 percent of prescription drug spending and 40% of the total GDP among innovator countries and was responsible for the development of 43.7 percent of the (new molecular entities).” According to the Bureau of Labor Statistics, the pharmaceutical and medicine manufacturing industry is responsible for some 332,000 jobs.

So, what would the new regulations do? If they are implemented, according to National Review’s Jeff Zymeri, drug development will drop off: “The CBO has predicted that the scheme provided for under the IRA would lead to a manufacturer-revenue loss of 15 percent. Such a cut in CBO’s predicted 45 new drugs per year would suggest around 6.8 fewer drugs per year, totaling around 121 lost over the 18-year horizon, as one report estimated.” The drugs most likely to disappear would be drugs that target rare conditions and thus have less of a market.

As an investor in biotech stock, I can say with confidence that investment will shift out of the sector and into other, freer sectors should the Biden administration move to quash profit margins in the sector. Why would investors sink money into a drug, only to find out that the more successful it is, the less profit there will be in it?

There is another solution: Force other countries to pay their fair share. This would ensure that Americans pay similar prices to those around the world, while also creating incentive for innovation. But that would require politicians to abandon their happy talk and deal in the real world. And that’s not something politicians are likely to do.

Ben Shapiro, 39, is a graduate of UCLA and Harvard Law School, host of “The Ben Shapiro Show,” and co-founder of Daily Wire+. He is a three-time New York Times bestselling author; his latest book is “The Authoritarian Moment: How The Left Weaponized America’s Institutions Against Dissent.”

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Rik
Rik
1 year ago

It’s ALL ABOUT Total Government CONTROL of your HEALTHCARE System! Beauracrats will DECIDE whether you get to LIVE OR DIE

Carolyn
Carolyn
1 year ago

So if the drug companies are so hard up for money for development of new drugs, why do they spend billions on useless advertising of prescription only drugs?

Judy
Judy
1 year ago

Would we really be worse off without another 1,000 new drugs? Every drug has one or more side effects, which then require more drugs. How about just returning to natural remedies when possible? People in general would be much healthier.

PaulE
PaulE
1 year ago

We cover this issue just the other day. Nothing new here.

As for the author’s most accurate assessment, just read his last paragraph. Even he doesn’t think the professional political class is up to the task. So just a waste of time posting this article.

MariaRose
MariaRose
1 year ago

When a policy doesn’t put caps on the prices, it is not a bargain despite the word salad used to “explain ” the “savings”. They did it with college costs–and housing costs–guaranteed coverage by federal funds as long as the company gets to make a profit. Meanwhile, behind the scenes, the cost is beyond what the coverage takes care of and is just passed on to the consumers. There is no price control at all.

johnh
johnh
1 year ago

In my opinion, the high cost of prescriptions are due to courts awarding millions for lawsuits related to that prescription , plus the high cost of liability insurance to doctors & Pharma to protect them. Tort Reform is needed in USA to limit these lawsuits to a reasonable amount. They warn you of side effects of drug & testing shows it impacts 5 in thousand people & that means that 995 people were helped by that drug. I would imagine there are a lot of drugs used in other countries that will not be sold in USA due to risk of million dollar lawsuits.

Rick
Rick
1 year ago

Has there ever been a dimocratic bill that didn’t sound good until the unintended consequences hit?

Robert Zuccaro
Robert Zuccaro
1 year ago

Make sure the Big Guy gets his cut, Big Pharma, or they’ll be after you again instead of holding you lovingly in their pockets.

Bill
Bill
1 year ago

I have no love for big pharma.We inundated by every manner of advertising that have warning disclaimers longer than the information about what the drug is and what it for. Our “regulatory” agencies are as corrupted as our legislators by the lure of big pharma money. I too hold little faith that the people that get elected to represent us have what it takes to walk away from the cash troughs. He sounds mostly like an apologist for big pharma with an after thought about not expecting much from the legislative.

Dan W.
Dan W.
1 year ago

What next Shapiro ? A hard hitting article against Medicare negotiating with doctors and hospitals ?

Medicare BAD. Free enterprise GOOD. How about this ? JUST DON’T GET SICK !!

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President Joe Biden walks with Vice President Kamala Harris along the West Colonnade of the White House, Friday, May 26, 2023, to the Oval Office. (Official White House Photo by Adam Schultz)

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