A winning issue for Trump: Repeal the Biden-Harris price controls

When President Biden and Vice President Harris blame inflation on price-gouging and “corporate greed,” they are imitating Venezuelan dictator Nicolas Maduro. After all, Maduro has made that same or a similar assertion about greed each time he has imposed or tightened price controls. His actions in this regard, and the currently ruined state of his once-wealthy nation, are not merely coincidental. 

Unfortunately, Biden and Harris are also imposing price controls in the health-care sector, through an “agreement” with drug companies.

Price controls have a long and unfortunate track record, in Venezuela and everywhere else they have been tried. In that country, when bakers were forced to sell bread at a loss, they baked less or stopped baking bread altogether. This resulted in scarcity and higher prices for everyone, which Maduro again blamed on the bakers’ greed.

Former President Donald Trump’s campaign would do well to highlight the disastrous effects of price controls. The Biden-Harris drug policy is one which, should the Republican ticket prevail in November, Trump could reverse and tout as an early win in 2025.

Biden’s so-called Inflation Reduction Act promised lower drug prices, but in order to deliver them, it imposes a 95 percent excise tax penalty on drugs that do not conform to the government’s price dictates. This will harm consumers. The results will be, paradoxically, higher prices, reduced access to needed drugs, or a combination of both.  

People are familiar with prescription drug television commercials. On screen, smiling actors frolic in pleasant settings while a narrator gently reads off the Food and Drug Administration (FDA)-mandated litany of side-effects. If federal legislation came with such warnings, the one for this bill would read: “This legislation claims to put a limit on how much medicine may cost, but side-effects may include the doubling of what individuals pay for medicines or reduce access to them altogether.” 

The implementation process of the recent agreement on drug prices is already underway, but it’s not too late for federal lawmakers to correct a mistake that could hike prescription drug prices and make breakthrough drugs scarce. The “negotiated” prices do not go into effect until 2026.  

The price negotiations and decisions do not take place in a vacuum. Theoretically, the HHS Secretary is supposed to consider a medicine’s research and development costs, production and distribution costs, and other economic and health care factors. Yet, in practice, when regulators are supposed to do something, it just means they must give it sufficient lip-service. 

The history of regulatory cost-benefit analysis is rife with examples of this. For instance, the 1993 Executive Order 12866 directed each agency to “design its regulations in the most cost-effective manner” so that they “impose the least burden on society” with benefits exceeding the costs of the regulation. But history teaches that regulators’ often unsubstantiated assumptions contort the standards. As Justice Antonin Scalia noted in Michigan v. EPA, rebuking regulators, “One would not say that it is even rational, never mind ‘appropriate,’ to impose billions of dollars in economic costs in return for a few dollars in health or environmental benefits.” 

As there is often no objective standard for regulations meeting theoretical cost-benefit analysis thresholds, so too the HHS Secretary has near-total discretion to claim use of proper considerations in price negotiations. Yet the dictates of the secretary’s published prices are anything but discretionary. They carry the weight of the government’s iron fist. 

The excise tax in the “Inflation Reduction Act” will either force a doubling of prices or something far worse. The exact amount depends on the baseline, which is not clearly defined in IRS rulemaking. If a company charges $100 for a drug, the IRS could interpret the baseline as $100, with the company adding the $95 excise tax for a total price of $195. It could also interpret the baseline as the $100, with the government taking $95 and the company receiving only $5.

Given the amount of power delegated to the agency, is it any surprise to see the drug companies bow and scrape before the clenched fist of HHS?

Faced with such a Stalinistic approach, companies will be less inclined to invest in research and development that will lead to tomorrow’s breakthrough medicines. These are for-profit companies, whose employees and executives will put their talent and skills to work elsewhere if their effort is not properly compensated. That is basic economics. 

More than 40 organizations wrote House Speaker Mike Johnson (R-La.) and Senate Republican Leader Mitch McConnell (R-Ky.) in late June, urging market-based reforms to this terrible policy. Senate Majority Leader Chuck Schumer responded that same day, “Make no mistake — MAGA Republicans want you to pay more for your prescription drugs. We won’t let it happen.”

Neither the use of scare-words like “MAGA,” nor the radical progressive pushback to the letter are surprising. However, the harm this policy will cause cannot be ignored. 

Certainly, pharmaceutical companies are worthy of scrutiny on many levels. Seniors and all Americans need market-oriented reforms that lower drug prices and hold pharmaceutical companies accountable for their failings. Such reforms would reduce prices, avoid drug shortages, and encourage continuing development of tomorrow’s groundbreaking medicines.  

This is an important battle for the future of our country. The clock is ticking. Harris, enabled by a sympathetic left-leaning media, thinks she has a winning issue here, but it could be turned to her disadvantage.

The Trump campaign needs to double-down on connecting the inflation, from which we all suffer, back to left-wing Democratic policies that have characterized the Biden-Harris administration. The result would be both a winning message for the Trump-Vance ticket and a relatively easy early win in the next Trump administration. 

Doug Branch is the principal of Phronesis Insights.