The House's New Drug Plan is 31 Times as Deadly as COVID-19 to Date

The revised drug plan passed by the House last month may be well-intended, but by robbing seniors of the health gains from future drugs we find it will be 31 times as deadly as COVID-19 to date.

The plan regulates price growth during the life cycle of a drug through price negotiations that will stifle innovation and reduce competition, as well as inflation caps that compound in damage over time. The plan also abandons seniors by raising their total costs — premiums plus cost sharing — by shifting government costs onto competitive plans resulting in premium hikes larger than cost-sharing cuts.

I have argued that drug price controls will raise the price of better health in the future because a new drug makes a healthier life go from being prohibitively expensive down to patented prices and then even lower generic ones.

In a new report, we find the revised plan will reduce R&D spending by 18.5 percent or $663 billion through 2039 resulting in 135 fewer new drugs. This will generate a loss of 331.5 million life years in the U.S., a reduction in life spans about 31 times as large as from COVID-19 to date. The cut in new drugs is about 27 times larger than CBO’s predicted loss of 5 drugs over the same period, a mere 0.63 percent reduction compared to baseline.

Our analysis is fully transparent, as opposed to CBO which only publishes its results. This makes it impossible for taxpayers funding CBO’s analysis to evaluate it and differs from peer-reviewed publishing that aims to make replication feasible. In particular, the Street and others interested in funding medical R&D have to rely on CBO flawed results.

Our predicted drops in industry revenue are larger than CBO’s. Though CBO scored the overall bill too low, correct scoring of the drug provisions would have made it even lower highlighting that CBO scores of budget impacts often poorly reflect economic well-being.

READ MORE