Last week, Vice President Kamala Harris and President Joe Biden took a victory lap after the Centers for Medicare and Medicaid Services (CMS) announced the results of its drug “negotiations” with pharmaceutical firms for ten drugs covered by Medicare.

This process began after the Inflation Reduction Act granted CMS the authority to negotiate drug prices, with manufacturers facing steep penalties and punitive tax rates for failing to participate. However, calling these efforts “negotiations” stretches the meaning of the term.

The Biden-Harris administration touted billions of dollars in savings for taxpayers and patients, and most media dutifully parroted these talking points. But the reality is more nuanced and highlights a fundamental problem with the left’s approach to health care. 

Here’s why: the administration claimed billions in savings based on the new prices set through these negotiations compared to the manufacturers’ listed prices. For instance, Eliquis — a blood clot medication made by Bristol Myers Squibb — has a list price of $521. Biden’s CMS announced a new price of $231, suggesting substantial savings for taxpayers. That’s where it gets complicated.

While the list price might be $521, in the drug purchasing market, private sector entities known as pharmacy benefit managers (PBMs) already negotiate for lower drug costs on behalf of plans and employers. The actual price paid — the net price — is significantly lower, thanks to PBMs.

Industry studies show that PBMs often secure discounts of 50 percent or more off the manufacturer’s desired list price. This means that the free market already does a better job than the government, and without “negotiating” with the threat of federal force. 

Yet ironically, the Biden-Harris administration is working to put PBMs out of business so all “negotiations” can be done by the government, instead of just for a few drugs purchased by Medicare. This would mean higher prices for everyone. 

Did Biden or Harris mention this during their celebration of government intervention in the market? Of course not. They want you to believe that federal intervention is the only way to reduce prices, when in fact the market already performs this role effectively.

Republicans should keep this reality in mind when the left advocates for a government takeover of the prescription drug industry. Big government does not make things cheaper, and this sector is no exception.