Yesterday morning the Centers for Medicare and Medicaid Services (CMS) announced the so-called Maximum Fair Prices (MFP) for the first 10 drugs to enter the “negotiation” regime under the Inflation Reduction Act (IRA).
This small sample of data is the first genuine head-to-head comparison of what reliance on private negotiation – the original raison d’etre of the Medicare Part D program – yields versus government intervention into prices. The results speak poorly for the IRA. The graph below compares the discount from list price negotiated in the private sector (blue bars) compared with the additional discount (red bars) achieved by IRA assault team to set MFPs (data comes from Health and Human Services). It looks like there are two basic takeaways:
- Despite being armed with enormous artillery (confiscatory taxes, the possibility of banning sales of all a company’s drugs in Medicare, negotiations conducted in secret isolation chambers with no sunshine of public scrutiny, etc.), the Biden Administration didn’t do much. Perhaps the moral is that it’s time to stop giving the government so much artillery to misuse.
- Or perhaps the raid accomplished all that it could. Put differently, maybe, just maybe, it is really expensive to invent, develop, test, and market drugs – so expensive that there was little left to extract from the manufacturers.
Source: Amercian Action Forum