Will Trump Send Inflation Reduction Act to the Morgue?

It’s been a mixture of fascinating and horrifying to see the Democrats’ post-mortem after their historic losses last month.

Some have owned up to their disastrous policies, with independent Bernie Sanders notably calling out the party for abandoning working-class Americans. Most have not, instead doubling down on the hateful identity politics and name-calling that typify the post-Obama Democratic Party.

Rep. Nancy Pelosi, D-Calif., has an interesting take, insisting that “it would have been different” if Pres. Biden had bowed out sooner, thereby giving Vice President Kamala Harris more time on the campaign trail.

Now Pelosi may have forgotten that when Sen. Harris campaigned for the 2020 nomination, Democratic voters rejected her so fast that she dropped out in 2019. Instead, she became Biden’s diversity-hire vice president, a pretty impressive consolation prize where she had exactly one job: break ties in the Senate.

Infamously, Harris exercised that Constitutional responsibility when she broke the 50-50 tie on the Inflation Reduction Act (IRA), the signature legislation for the Biden-Harris Administration’s “Investing in America.” The IRA has been one of those disasters Democrats won’t own up to, ushering in not just the worst inflation in recent memory, but jacking up prices for seniors’ prescription drugs as well.

With the IRA, the Biden-Harris Administration used the threat of price controls to change how Medicare negotiates for drugs.

The IRA included a provision that imposes an excise tax of 95% (!) on the sale of medicines sold by companies unless they agree to the prices set by the government. This increased cost is suffered by seniors, and anybody who purchases the drug otherwise, not just inside Medicare.

To start, the Department of Health and Human Services selected 10 drugs for this program, with negotiations having happened over the last two years, then going into effect in 2026. (Total out-of-pocket cost for these drugs was $3.4 billion in 2022.)

But things are planned to get worse with time: the IRA statute mandates the government add 50 more medicines to the list!

Under this style of heads-I-win-tails-you-lose negotiation, companies have an illusory choice of accepting the government-dictated price, or paying the IRS the outrageous excise tax on gross revenue of the same medicine. So for seniors on fixed incomes, that means either paying double for the drugs they need or not having access to them at all because of the scarcity that price controls inevitably bring.

Under the IRA, Medicare premiums have already gone up while choice has gone down, but it could get worse. In great Soviet style, the Democrats have called their price controls the “maximum fair price” (MFP).

Because of the IRA’s impact on the drugs available through Medicare, as many as 3.5 million patients will see price increases. Starting in 2026 that will be:

• Beneficiaries taking a medicine subject to an MFP will see an average increase in out-of-pocket costs of 12% in 2026
• Low-income beneficiaries on Part D have seen an average price increase of 27%
• Beneficiaries enrolled in an employer group waiver plan (EGWP) have seen a much higher average price increase of 29%

Price controls do not work. They choke the free market and drive scarcity by killing incentives. If price controls worked, then they would have worked all the times that socialist governments have already tried them.

In business school, a teacher told us “a left-leaning economist is a contradiction in terms.” The key is transparency and competition, not a dominant bureaucracy trying to force everyone to obey.

What we need is for President-elect Trump and Republican majorities in Congress to repeal the IRA. Nothing can undo the damage it’s already caused by inflation, but they can prevent it from getting any worse.

Returning to the point of Harris’ historic loss: the problem wasn’t that she didn’t have enough time as a national figure. The problem is that she had too much. If she hadn’t been in place to break the IRA vote in the Senate, it would have been different.