Ryan Ellis, President
85 conservative groups today sent a letter to the bipartisan Congressional leadership urging them to repeal President Biden's 95 percent tax on prescription medicines. The text of the letter is below:
Dear Speaker Johnson, Leader Jefferies, Leader Schumer, and Leader McConnell:
As you know, a Democratically-controlled Congress passed and President Joe Biden
signed the so-called “Inflation Reduction Act” in summer 2022. Along with a super-sized
IRS, multiple down payments on the Green New Deal, and Obamacare subsidies to bail
out that failed program, President Biden’s signature law created a new government
price control on prescription medicines enforced by the threat of a 95 percent excise
tax on the same drugs.
This price control is called a “negotiationon” by proponents of the law, but there is no
actual choice involved. A drug manufacturer must submit to the government-imposed
price control, or subject sales of that drug to a confiscatory 95 percent excise tax. That is
no choice at all. Robust negotiation and competition requires the ability to say “no.”
Like other excise taxes (gasoline, beer, liquor, airline tickets, etc.), this new 95 percent
tax on prescription medicines will ultimately fall on the end consumer–in this case, the
patient at the pharmacy counter who could face a drug store bill twice as high as before.
If the tax is avoided by the drug company thanks to it succumbing to the government
price control, the pharmacy customer will suffer the usual impacts of price controls–
scarcity of the medicine he needs, and a slowdown of new cures as research costs can
no longer be funded by drug sales.
A key danger of Joe Biden’s 95 percent drug tax as the “alternative” to the government
price control is that it might spread to other areas of the economy. One could easily
see a 95 percent tax on internet service providers that don’t submit to an FCC internet
price control, a 95 percent tax on interest collected by banks that don’t submit to a HUD
mortgage rate cap, a 95 percent tax on gasoline which is too expensive for the Energy
Department, or a 95 percent tax on car manufacturers who don’t sell government price-
controlled vehicles at the Commerce Department’s preferred price. The only limit to this
practice is the political will of the Congress and the president at any given time. This 95
percent tax on prescription medicines is the test case for using this model to command
and control the economy.
There is nothing wrong with market competiton bringing down the price of
prescription drugs. But government price controls will lead to minimal production,
scarcity of the medicine, and eventually government rationing. The alternative, a 95
percent drug tax, will mean a massive increase in the price of the medicine for
everyone in America, along with the prospect of other harmful distortions to
our health care system and our economy.