It Will Take More Than US Bargaining Power to Cut Drug Costs
The government’s new authority is limited to just 10 medicines purchased by Medicare, and manufacturers may charge more for years before negotiations kick in.
It’s perhaps the only idea that unites former President Donald Trump and progressive Vermont Senator Bernie Sanders: The US pays too much for prescription drugs that are dramatically cheaper elsewhere in the developed world. The Inflation Reduction Act, President Joe Biden’s signature legislative victory, is meant to fix that by allowing the US government to negotiate directly with drugmakers, much like what Germany and France have done for decades. Progressives have cheered the move as a transformative boon for consumers, while some doomsayers in Big Pharma have warned it will end US pharmaceutical innovation because manufacturers will slow drug development in the face of price controls.
Despite those high hopes and dire warnings from the two sides, Uncle Sam’s new ability to negotiate drug prices is unlikely to make a meaningful dent in how much Americans pay for their medicines, which is determined by a Rube Goldberg machine of discounts, rebates and middlemen that baffles and sometimes bankrupts consumers.