Angie Craig ignores the people harmed by the Inflation Reduction Act

New law will raise health care costs on some, result in fewer new life-saving cures and more lives lost for others

Rep. Angie Craig recently led off a commentary in the Star Tribune with a constituent’s story to defend and personalize her vote in favor of the health care policies enacted in the Inflation Reduction Act (IRA). The story highlights Bob, a 71-year-old man with MS whose out-of-pocket costs for a drug had risen to over $10,000 a year. It’s a sympathetic story and the new law will indeed help him. But his story needs to be put in context with the harms imposed by the law.

The IRA pursues several strategies to lower health care costs for some people. It increases individual health insurance premium subsidies for three years. To control drug costs, it requires drug manufacturers to pay Medicare rebates when price increases exceed inflation, redesigns the Medicare Part D prescription drug benefit to reduce cost-sharing, and requires Medicare to set prices for certain high-cost drugs.

Craig claims the law simply empowers Medicare to negotiate drug prices, similar to large employer health plans. However, the law includes a 95 percent excise tax penalty on the sale of the drugs subject to negotiation for failing to agree to the government price. That’s a price control, not a negotiation.

Higher costs for privately insured

We know some people will benefit from lower insurance premiums and lower drug costs through Medicare. But now consider who will be harmed.

To start, the law will raise individual market premiums on unsubsidized people. Research shows the current premium subsidies inflate premiums and increasing them will only inflate them more. According to the Congressional Budget Office (CBO), increased premium subsidies will also push some employers to drop coverage. This will be particularly harmful to people with pre-existing conditions who lose employer coverage and are pushed into less generous individual market coverage with higher cost-sharing—a harm precisely opposite to the benefits Bob receives.

Next, by restricting future pricing flexibility, the CBO projects the law’s price controls will lead drug manufacturers to increase launch prices to ensure adequate future pricing. There’s also a strong possibility that drug manufacturers will raise prices on private payers to help mitigate losses from lower Medicare payments.

Fewer new cures, more lives lost

On top of these financial harms, there is a more severe harm that deserves greater attention.

The IRA will, without question, result in more people suffering through debilitating chronic conditions and dying from dread diseases. As American Experiment detailed in a report published in early July during the height of the congressional debate over these policies, the law’s price controls will reduce drug manufacturers’ revenue from future drugs, which will reduce the return on investments in research and development.  As a result, drug manufacturers will invest less and develop fewer new life-enhancing and life-saving drugs.

Estimates on how many fewer drugs vary widely. The CBO estimates 15 fewer new drugs over 30 years. University of Chicago economists Tomas Philipson and Troy Durie estimate a much larger reduction amounting to 135 fewer new drugs through 2039. The CBO estimate likely lowballs the impact. Drug manufacturer Eli Lilly and Company CEO Dave Ricks said he would be “shocked” if the law doesn’t reduce the number of new drugs by 15 from his company alone.

Philipson and Durie estimate 330 million life years will be lost due to fewer new cures. We’ll never know exactly what cures stall or never surface, and so we’ll never know the names of the people harmed.

However, we know their pain and grief. Anyone touched by the untimely death of a loved one from an incurable cancer or a life-changing chronic condition knows what can be avoided by future cures. For me, it’s my father who died from a glioblastoma brain tumor when he was 58. Twenty years later, there is still no cure, just as there’s no cure for Bob’s MS.

Angie Craig and her Democrat colleagues in Congress could have enacted a law to lower Bob’s Part D cost sharing without undermining access to future treatments and cures for everyone else.

But they needed the fiscal savings from the drug price controls to justify naming the law the Inflation Reduction Act. So, they traded a political talking point for future cures.