A majority of House Republican lawmakers recently released a budget plan that proposed once again banning Medicare from negotiating prescription drug prices — a move it justified with theatrical language and highly misleading data.
The Republican Study Committee (RSC), which represents roughly 80 percent of House Republican lawmakers, accused President Joe Biden and congressional Democrats of embracing “socialist price controls that will limit access to life-saving drugs for those who desperately need them,” by enacting a pilot program allowing Medicare to negotiate prices on a handful of medicines for the first time. The budget pledges to repeal the program — which Biden recently called on Congress to expand in his State of the Union address.
According to a recent RAND Corporation study, drug companies charge 278 percent higher prices for medicines in the United States than in other wealthy countries. The primary reason for this is that Congress for decades barred Medicare from negotiating drug prices, something virtually all other countries do. Adding insult to injury, the U.S. government helps fund research and development on all drugs that are approved for sale.
The Biden administration issued a fact sheet on Thursday pointing out that 80 percent of Republicans are now backing a budget that “raises Medicare costs for seniors by taking away Medicare’s authority to negotiate prescription drug costs.” The provision was passed into law as part of Democrats’ 2022 Inflation Reduction Act (IRA). Last fall, the Biden administration announced the first 10 drugs subject to negotiation.
In order to justify the repeal plan, the RSC cites a study from the University of Chicago to argue that “the price-control provisions included in the Inflation Reduction Act would reduce medical research and development spending by as much as 60 percent and result in 342 fewer life-saving medical treatments.”
There’s one big problem with that: The study cited by the RSC does not analyze the Medicare drug negotiation provision passed as part of the IRA; it analyzes an earlier version of the measure before it was significantly watered down by industry-friendly Democratic lawmakers.
The University of Chicago study found that Democrats’ drug pricing legislation, H.R. 3, could lead to up to “342 fewer new drug approvals” over two decades. A subsequent issue brief from the same authors projected that, after Democrats scaled back their drug pricing plan, the new version would lead to “135 fewer new drug approvals.”
An RSC spokesperson did not respond to Rolling Stone’s request for comment.
To be clear, the University of Chicago analyses of both bill versions were extreme outliers. A 2021 study by the nonpartisan Congressional Budget Office projected that even if profits on top drugs were reduced by as much as 25 percent, it would only result in 25 fewer drug approvals over two decades.
When the CBO reviewed the watered-down drug negotiation provision that was later included in the IRA, it estimated the measure would result in just five fewer drugs being introduced over two decades. The issue brief from the University of Chicago notes that its “innovation estimates are 27 times larger than CBO’s,” based on its authors’ “preferred methodology.”
The University of Chicago study and issue brief were both led by Tomas Philipson, a former Trump administration economic official with deep ties to the pharmaceutical industry.
According to ProPublica, Philipson previously led a consulting firm that worked for two dozen drug companies and industry groups, including the powerful lobby Pharmaceutical Research and Manufacturers of America (PhRMA). He currently serves on boards at several health and pharmaceutical companies, according to his LinkedIn page.
Philipson has directed the University of Chicago’s Health Economics Initiative. The initiative’s website says it launched with support from the pharmaceutical giant Pfizer.
PhRMA has long been a top donor to the House GOP’s dark money arm, the American Action Network. The drug lobby donated $7.5 million to the organization in 2022.
