Democrats’ “SMART Prices Act” Would Expand Dangerous Price Controls on Medicine

The recently introduced Strengthening Medicare and Reducing Taxpayer (SMART) Prices Act doubles down on the harmful price-control legislation enacted in the Inflation Reduction Act (IRA) of 2022. The passage of this bill would only hasten and exacerbate the disastrous effects of the IRA by raising health costs, inhibiting medical innovation, and costing lives. Lawmakers must fight its passage and look to repeal sections in the IRA. 

A key point in the SMART Prices Act is increasing the number of drugs eligible for “negotiation” from 10 to 20 in 2026, and 40 in 2027 onwards. The “negotiation” mentioned could be more accurately described as federal price setting – with companies defying the Secretary of the Health and Human Service’s decided price facing up to a 95 percent tax.  

The impact of this forced governmental price cut would be incredibly destructive to the great medical innovation on which America thrives – particularly in the Research and Development process. An NBER study conducted by Thomas A. Abbott and John A. Vernon finds that cutting prices of drugs by 40 to 50 percent will lead to 30 to 60 percent fewer R&D projects being undertaken. With already only 3 out of every 10 pharmaceutical products generating above average returns after all costs, drug companies are already taking a massive financial risk. By slashing financial incentives, Democrats backing this bill show a fundamental misunderstanding of the pharmaceutical industry and open the door for widespread drug shortages. 

In fact, even before its implementation, the current drug price control scheme has hindered research and development of new medicines. Several drug manufacturers like Eli Lilly, Alnylam, Bristol Myers Squibb, AstraZeneca, and Novartis have warned of development programs they have already had to end or programs they will likely have to end in light of the IRA. 

Further, foreign countries have imposed price controls and, in comparison to the U.S., have far lower access to treatments and cures as a result. Galen Institute research show that of the 290 new medical substances launched worldwide between 2011 and 2018, the U.K. had access to 60 percent, Japan had 50 percent, and Canada had only 44 percent – all countries who impose governmental price control. The U.S. had access to a whopping 90 percent. Additionally, it’s not just American citizens that will be impacted – although only being roughly 4% of the world’s population and 24% of the global economy, America pushes out an “outsized two-thirds of all new pharmaceuticals introduced worldwide”, which can be attributed to the incredibly competitive and rewarding nature of the industry. 

Imposing governmental price control takes away our country’s edge in medical innovation and puts American lives at risk. A University of Chicago study highlights this – finding that the cut in R&D activity would lead to 135 fewer new drugs, resulting in a predicted loss of 331.5 million life years in the U.S. 

The Food and Drug Administration (FDA) itself echoes this concern, citing lack of financial incentives as a “root cause” of drug shortages. A Senate Committee on Homeland Security and Governmental Affairs report finds drug shortages reached record highs at the end of 2022, and a report from the American Cancer Society warns of drug shortages leading to “delays in treatments that could result in worse outcomes” due in part to “low profit margins”. In a country already facing drug shortage crises, with lack of financial incentives being a root cause, how could further reducing financial incentives possibly be a good thing for the American people?   

An often-argued justification of the SMART Prices Act and the drug pricing provision of the IRA is a reduction in healthcare spending – estimated by The Congressional Budget Office to reduce federal healthcare spending by $101.8 billion over a 10-year period. What this estimate fails to consider, however, is the key role that pharmaceutical treatments play in preventing more expensive measures, such as surgeries and hospitalizations. Another study from the University of Chicago states that on average, “real domestic sales by US pharmaceutical innovators” from 2001-2021 resulted in a 4.5 percent reduction in total healthcare spending – proving the SMART Prices Act does only the opposite of reducing healthcare spending. 

Furthermore, the questionable implementation of the IRA by the Centers for Medicare & Medicaid Services (CMS) certainly does not warrant an expansion by the SMART Prices Act. A memo released by the CMS in March states that its Section 30 (The “identification of Selected Drugs” for 2026) is “final” without accepting public comments – which is undoubtedly concerning when feedback is not accepted from the citizens whose interests should be the CMS’s main priority. Additionally, it states that the “CMS may make changes to any policies, including policies on which CMS has not expressly solicited comment, based on the agency’s further consideration of the relevant issues” – they aren’t even held to the memo they release, and can make changes without making a public statement beforehand simply based on their subjective “further consideration”. 

The issues don’t stop there. Buried in Section 40 of the same memo is a statement that all information and communication between CMS and Pharmaceutical Manufacturers shall be destroyed – including initial and subsequent offers, justifications, and “any written notes or emails pertaining to negotiations”. Why is the CMS making it a clear priority to minimize transparency? Denying the public from having any access to negotiations leaves the door wide open to dangerous amounts of corruption and backdoor deals – something that must be prevented. 

The pharmaceutical price control policies within the Inflation Reduction Act are fundamentally flawed and created with an ignorance of the drivers of the pharmaceutical industry. The Strengthening Medicare and Reducing Taxpayer Prices Act is a step in the entirely incorrect direction, hastening and bolstering policies that should undoubtedly be repealed. Price setting is not a solution to anything – it puts millions of lives at risk, it costs far more than it saves, and its current implementation within the CMS is a disgusting example of bureaucratic bloat and partisan corruption. Lawmakers must reject the SMART Prices Act and force transparency within the price setting board of the CMS – or better yet, repeal the pharmaceutical price control policies within the IRA altogether.