Wednesday, September 6, 2023

Three Things to Know about Prescription Drug “Negotiations”

Here’s a Washington truism: Whenever Democrats hold a “celebration” on health care, you can all but guarantee the event means the government is taking greater control. (For that matter, this axiom holds true for Republicans in far too many cases.)

So it proved just before the holiday weekend, when the federal Centers for Medicare and Medicaid Services (CMS) released the list of the first 10 drugs over which it will “negotiate” prices with drug companies over the course of the next year. The “negotiation” provisions, which are scheduled to take effect in January 2026, were part of last year’s Inflation “Reduction” Act. And as with most programs the left claims will create a socialist paradise, there’s more to it than meets the eye.

The ‘Negotiations’ Are Rigged

Despite the name of the program, the “negotiation” will prove anything but. The statute explicitly defines a “maximum fair price” — defining the outcome before the “negotiations” even begin.

Under the law, the “maximum fair price” is set from 40-75 percent of current price levels, depending upon how long the drug has been on the market. Companies who refuse to participate in this process have only one of two options: They can face taxes of up to 1,900 percent of the revenue of the product(s) in question — or they can drop out of the Medicare and Medicaid programs entirely.

Democrats had to structure the program this way for two reasons: First, the rhetoric of “negotiations” sounds more appealing to the public than the phrase “socialist price controls,” which is what this program amounts to in practice. Second, the Congressional Budget Office has long held that government-run “negotiations” would not achieve any additional budgetary savings without some type of cudgel to compel additional concessions.

In other words, the program represents a “negotiation” in the same way a robber “negotiates” with employees at the bank. And the coercive element could lead the entire program to a date with the Supreme Court.

The Program’s Constitutionality Is in Question

Over the past several weeks, drug manufacturers and other business groups have filed eight separate lawsuits against the program in various jurisdictions across the country. While Merck filed the first suit, they all make similar claims, alleging that the program violates the Fifth Amendment by taking property (i.e., patents and intellectual property) without due compensation, the Eighth Amendment by levying excessive fines, and the First Amendment’s guarantee of free speech by compelling them to agree that CMS is offering a “fair” price.

Legal experts disagree as to whether the claims will get traction in federal court; no rulings have yet been issued. But it’s entirely possible the Supreme Court will hear arguments on one or more of these cases before the program goes into effect more than two years from now.

Democrats Ensured the Savings Won’t Help Medicare

Democrats have often used the Medicare program as a piggy bankraiding it by more than $700 billion more than a decade ago to fund Obamacare. They repeated the trick last year, using hundreds of billions of dollars in Medicare “savings” to pay for other provisions of the Inflation “Reduction” Act.

Medicare is already functionally insolvent, and its Hospital Insurance Trust Fund will be officially exhausted within a decade. Yet Democrats used all the Medicare savings from drug “negotiation” and other price controls to fund things like subsidies for Teslas and 87,000 new IRS employees.

Using Medicare dollars to fund climate pork doesn’t help seniors one bit. But then again, helping seniors isn’t the left’s primary agenda — increasing dependence is. And that’s the ultimate objective of the drug “negotiation” program, not to mention the Inflation “Reduction” Act as a whole.

This post was originally published at The Federalist.