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In an op-ed in the Wall Street Journal headlined “A Law That Isn’t Red or White—and Sure Isn’t Green,” Sen. Joe Manchin claims his “Inflation Reduction Act” isn’t so bad one year in.

“I’m proud of the Inflation Reduction Act,” the senator asserts. He gives several examples of how his law advances fossil fuel projects that use green technologies such as carbon-capture. He also acknowledges “this administration’s best efforts to botch the law’s [coal and oil-and-gas provisions’] implementation.”

Taking Sen. Manchin at his word about this aspect of the IRA, an unmentioned part of this law renders it a destructive mistake. The costs to individual human beings and to society from the drug price controls may haunt Sen. Manchin long after he retires from politics.

The IRA’s price-setting process lacks a level playing field, transparency and due process. The Information Technology & Innovation Foundation notes its “ambiguous and poorly crafted processes, which the Centers for Medicare & Medicaid Services (CMS) will use to calculate” a targeted drug’s price.

A big clue of IRA’s unfairness: the drug price controls regime employs pricing by uneven bargaining power. There’s zero actual negotiation.

Biopharma innovators will face a choice between taking the government’s price or declining it and paying an excise tax of up to 1,900% on all drug sales. That’s the epitome of confiscatory and extortionate taxation and a preordained outcome.

The arbitrary, capricious unfairness continues. The Biden administration on August 29 named the first 10 medicines subject to their prices being set by the government. This gave pharma companies a month to provide CMS information for determining its initial price bid.

Stacked listening sessions this fall will build a record backing low-ball prices. Drug makers get only one opportunity to counteroffer in meeting with CMS.

Sen. Manchin’s IRA law prohibits drug companies hauled into the CMS star chamber from appealing the government’s decision in court or even administrative review.

The prices CMS dictates won’t account for the adverse effects of Biden’s high inflation. The selected drugs’ makers have until October 2, 2023, to give CMS data and evidence to consider in setting prices. This information may be outdated by the time price-controlled rates take effect January 1, 2026—years after the data were drawn and inflation keeps reducing the value of money.

As for due process, CMS has been opaque in setting up the drug pricing regime. The agency has ignored the Administrative Procedure Act. The APA requires that due process protections be observed in executive branch rulemaking and other agency actions. CMS has written the rules of the drug price controls game unilaterally.

IRA lets federal agencies operate in a black box. This law amounts to a cornerstone ensconcing the Administrative State.

Further, IRA’s drug price controls will impose a heavy cost on medical innovation. Government price dictation will reduce funds for research and development of new pharmaceuticals. That means fewer new medicines developed.

A University of Chicago study explains the effect of “a drug-manufacturer-revenue loss of 15 percent from the IRA . . . in R&D and new drugs . . . . [A] 15 percent cut in the CBO's [Congressional Budget Office] prediction of 45 new drugs per year would suggest around 6.8 fewer drugs per year, totaling around 121 lost over the 18-year horizon.” And CBO doesn’t account for all the factors the Chicago study does.

That report assesses specifics, such as the first 10 drugs. Chicago researchers examine the effects of the IRA-shortened patent life of small-molecule drugs, of price-cutting by drug-class competitors and IRA-created deterrents to generic drug entry.

For example, CMS exempts large-molecule medicines—biologics—from “negotiation” for 13 years after Food and Drug Administration approval. It subjects small-molecule drugs—pills—to price controls after only 9 years. Seven of the first 10 price-controlled drugs are small-molecule.

This variety of takings of private property without just compensation raises fundamental property rights and constitutional concerns. CMS will take away years of patent term, erasing billions of dollars of valuable time on the market at market prices.

It also has practical effects. Biologics must be administered in a doctor’s office or a clinic. You can’t take them at home with your breakfast. Convenience for patients managing chronic conditions translates into medication adherence, which oral drugs promote.

It’s hard enough to discover and develop ways to treat or cure diseases such as cancer, diabetes or Parkinson’s. Government price controls shrinking the innovation pipeline condemn patients to earlier death, longer suffering and more expensive medical care over the long run.

Sen. Manchin and President Biden run roughshod over property rights with their IRA. Their regrettable law ironically runs counter to the president’s Cancer Moonshot.

I hope Sen. Manchin doesn’t get sick starting in 2026.

President Biden took major credit when he announced the first 10 medications to face price negotiations with the Centers for Medicare and Medicaid Services. He embraced the government price-setting mechanism as “a key part of Bidenomics.”

Will Mr. Biden still be crowing when the price controls he and Sen. Joe Manchin made a cornerstone of their “Inflation Reduction Act” don’t work as touted? Will he still praise government price controls on Medicare pharmaceuticals when Bidenomics meets economic reality, as this experiment in socialized medicine plays out?

The Wall Street Journal warns that Mr. Biden’s assertions about the IRA (more aptly the Inflation Stimulation and Innovation Destruction Act) lack candor. “[H]e’s exaggerating the [law’s] benefits while ignoring the larger damage.”

The Journal explains that IRA price controls start with “10 [medicines] this year and a total of 60 by 2029. The law sets the drug price ceiling at between 25% and 60% of its list price, with no price floor. Drug makers that don’t participate or reject the government’s price will incur a crippling daily excise tax that starts at 186% and eventually climbs to 1,900% of the drug’s daily revenues. This is extortion, not a negotiation.” As the Lynyrd Skynyrd song says, you got that right!

Republican leaders of the Senate Finance, House Energy & Commerce and House Ways & Means Committees succinctly summarize the real economic and practical effects IRA drug price controls have already begun to cause: “The ‘Inflation Reduction Act’ (IRA) will raise prescription drug prices–worsen patients’ access to care, destroy new cures before they come to market, eliminate American jobs, threaten the United States’ leading role in innovative research, and create potential constitutional concerns around government overreach.” Ditto the Skynyrd lyric. These adversities will only worsen as price controls expand and IRA robs Medicare to pay for other liberal initiatives.

It’s critical that Americans understand what’s taking place under their noses. The Biden administration’s term “negotiation” is a misnomer. Biopharma innovators whose medicine is targeted must appear before CMS. The exchange over the price Medicare will pay for that drug ultimately comes down to what CMS says the price is—take it or leave it. Leaving it exposes the company to the punitive excise tax the Journal calls “extortion.”

If a mob-run criminal enterprise did the shakedown CMS is doing, law enforcers could throw the book at it and the gangsters would face long jail time, harsh penalties and seized assets.

The Biden-Manchin price control regime assaults property rights, particularly intellectual property. Their socialist approach robs the exclusive rights IP supposedly secures. It’s already driving away investors and upending research developing promising new treatments, especially those that treat or cure more than one disease or cancer.

Price controls will sentence patients to more intensive, expensive measures after their condition has worsened—hospitalization, invasive procedures, longer recovery. Novel medicines that could have been conveniently taken at earlier stages and managed, even cured in some instances, their diseases won’t have been invented. As this escalates government spending on health care, CMS could respond by restricting access to drugs and care.

Early indications are that the public views the Biden-Manchin drug price controls and the IRA more like a bait-and-switch than a set of laws that improves their lives. It seems Bidenomics does little to make citizens better off today than they were four years ago.

New polling shows seniors give the IRA low marks and have high satisfaction with pre-IRA Medicare Part D coverage. A McLaughlin & Associates poll sponsored by American Commitment finds three-quarters consider IRA different from what it was sold as. More than 80% say IRA hasn’t done anything for them, while over 90% disagree with IRA’s diverting Medicare funds to unrelated programs—in the fine print of the partisan law.

A Morning Consult survey for Medicare Today finds 91% of Medicare enrollees satisfied with their pre-IRA-price-controlled Part D drug plan; 86% report their Part D plan yields good value at affordable monthly premiums. This poll reports 2/3 of seniors favor biopharma companies and health plans setting drug prices instead of the government. Four out of five are concerned about government price-setting’s disruption of access to current medications, denial of access to new drugs and interference with their doctor’s best judgment of which medicine is right for them.

CMS lists the blood clot medicine Eliquis as the first of 10 drugs subject to price “negotiation.” CMS spent more than $16 billion for 3.7 million Medicare patients’ prescriptions of Eliquis from June 2022 to May 2023. Eliquis protects patients against stroke, at an average out-of-pocket cost of just $55 a month. The CEO of its maker Bristol Myers Squibb describes eloquently not only the facts CMS and Mr. Biden omit, he also highlights the human and humane elements that price controls and bureaucrats ignore.

These polling benchmarks show voters underwhelmed or worse by Bidenomics’s IRA and very highly satisfied with Medicare drug coverage without government price controls—which IRA is beginning to change dramatically. That combination could cost Mr. Biden votes.

Mark my words: At a minimum, this cruel IRA regime will increase Medicare spending while worsening human suffering.

The Federal Trade Commission has thrown so much spaghetti at the wall to see what sticks, it’s made a royal mess of the U.S. antitrust kitchen. In the process, it’s infringing on economic rights that amount to property rights.

Even losing prominent legal challenges against mergers and acquisitions—Microsoft’s acquiring Activision, Illumina’s reacquiring its spinoff Grail, Amgen’s acquiring Horizon Therapeutics, Meta Platforms’s acquiring Within Unlimited—hasn’t deterred the FTC’s radical leadership from wholesale sowing chaos in antitrust policy and enforcement.

You don’t have to love the Big Tech targets among antitrust lawsuits, you can remain clear-eyed about Big Tech censorship of conservative, Christian and other viewpoints and still recognize that the Biden FTC’s weaponization is a serious problem.

A common thread in the FTC’s and DOJ's legal marauding is advancing theoretical or potential concerns of anticompetitiveness. The courts (including FTC’s own in-house administrative “court”) have insisted on evidence to substantiate Chairwoman Lina Khan’s and her allies’ speculative assertions.

The FTC alleged the Illumina-Grail tie-up would harm Grail’s competitors. The agency ignored the fact that Grail is a startup with a novel cancer blood test and no competitors in an emerging market. The FTC’s administrative law judge ruled against the commission, writing, “The Clayton Act protects competition, not competitors.”

Now the FTC and the Department of Justice have proposed onerous merger review guidelines. These appear intended to slow merger reviews way down, increase cost and time barriers for M&A deals, sweep in many more proposed mergers and discourage potential merging parties from combining.

The ante of extensive paperwork filing requirements just to get an initial review will jeopardize many constructive mergers and acquisitions from even being attempted.

Such a hard freeze of routine M&A will carry severe economic consequences, including keeping many a startup or early-stage firm from being acquired by a bigger firm. The smaller business won’t be able to scale up, lacking the practical resources to thrive, perhaps seeing its promising innovations never reach consumers.

The goal of the Biden administration, and Chairwoman Khan in particular, is borne out to be eradication of the Consumer Welfare Standard and imposition of far higher hurdles even for competitively neutral or consumer-beneficial tie-ups.

President Biden’s 2021 executive order and pretty much everything the Khan FTC has done inject factors irrelevant to consumer welfare. The result: less freedom to benefit from the fruits of one’s labors. This new antitrust order assaults free enterprise, which incorporates private property rights in the economic sphere.

The Justice Brandeis model of the earlier part of the 20th century made antitrust jurisprudence malleable to the point of unpredictability and its being less tethered to the rule of law. Things like company bigness, labor market impacts, effects on competitors, etc. counted, with little concern for the welfare of consumers.

That changed in the 1970s and 1980s, as courts adopted objective standards like hard economic data, precisely defined markets and demonstrable consumer harm or benefit.

The Antitrust Division of the U.S. Justice Department has also taken an activist, neo-Brandeisian turn. But DOJ is constrained by greater accountability to Congress as a cabinet department. The FTC, like independent agencies in general, lacks sufficient accountability. The proof of this is in the pudding.

Upon resigning as the sole remaining Republican commissioner, Christine Wilson decried as one reason among many for her resignation the “antitrust enforcement policy statement [of November 2022] asserting that the FTC could ignore decades of court rulings and condemn essentially any business conduct that three unelected commissioners find distasteful.”

The U.S. House of Representatives has launched extensive oversight efforts of the FTC’s excesses. (See here, here, here, and here, for example.) Rep. Scott Fitzgerald (R-Wisc.) has proposed legislation to suspend the FTC’s powers when there isn’t at least one commissioner from the other political party (which has been the case since February).

It’s past time to force Chairwoman Khan, her colleagues and fellow travelers to clean up the mess they’ve made.

Locke's Notebook

Vintage Maps 3
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