Can an inflation cap on drugs be inflationary?

By Scott Gottlieb (original source AEI)

Members of the Senate Finance Committee have fashioned a well-meaning effort to modernize the Medicare drug benefit. Among its key features, the bill would help protect seniors from high out-of-pocket costs by limiting beneficiary cost sharing to $3,100 annually. It then seeks to offset some of these new subsidies by capping the increases that drug makers can take on the list price of their medicines.

In this way, the bill reflects a wider policy struggle underway in our debate over drug pricing. On the one hand, drug makers want to broaden coverage for medicines in programs like Medicare and Obamacare as a way to better insulate consumers from drug costs. On the other hand, policy makers don’t want to expand government funding for drugs without imposing more control over how these products are priced.

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