Update: The House passed the Inflation Reduction Act on Friday, Aug. 12.

This past weekend, the U.S. Senate passed the Inflation Reduction Act. Included in the law is a provision that gives Medicare Part D the ability to “negotiate” the price of medicines for the first time. Negotiate is in quotation marks because lawmakers are being ironic; no one can legitimately call the new price-setting policy a negotiation. 

What the new law would do is allow bureaucrats at the Centers for Medicare Services to arbitrarily set prices for certain medicines. If the manufacturer of the medicine doesn’t like the price offered, that’s fine. The government will instead hit the manufacturer with a 95% tax on the profits earned by the medicine. 

Such an absurd policy will have a dramatic chilling effect on investment to create new treatments and cures. While American taxpayers may provide hundreds of millions of dollars for research through government agencies like the National Institutes of Health or the Department of Defense, the hard truth is that it takes hundreds of BILLIONS of dollars invested in life sciences companies to turn discoveries into treatments.  

A new analysis of 110 currently approved therapies shows that only 6 of them would have made it to market if this new policy had been in effect during their development. Companies would not have had the necessary funds to invest in research and development. This legislation represents a $300 billion dollar blow to a sector that has saved millions of lives and is working tirelessly to end the global COVID-19 pandemic. 

NCBIO does support the Part D out-of-pocket-spending cap for patients included in the bill. We also recognize that some senators tried to protect the small, innovative companies that will be disproportionately affected when investment funds dry up and that there was an unsuccessful attempt to reform to the pharmacy benefit manager rebate system that is driving up out-of-pocket costs for everyone at the pharmacy counter.  

A recent analysis of the legislation passed by the Senate determined that it will likely lead to the loss of over 590,000 jobs across the country. In North Carolina, the toll would be a direct biopharma job loss of almost 6,600 jobs, along with nearly 37,000 jobs supported by the life sciences industry. 

There is very little win in this bill for North Carolina. Government price setting destroys innovation and jobs by removing the incentive to invest in the industry and cures of tomorrow. It is now up to the House of Representatives to intervene and stop this ill-conceived scheme before it starts.