As the Trump Administration establishes priorities for failed Biden policies to address, it might consider the ill-named Inflation Reduction Act (IRA) for the chopping block. Passed without a single Republican vote in 2022 it has been a disaster since day one, imposing exorbitant costs on American taxpayers and driving up inflation, making it a likely target for DOGE. The IRA upended key balances in healthcare struck by decades of bipartisan work that now threaten seniors’ access to drug coverage as well as cures yet to be discovered. Trying to fix it, as Republicans did the ACA, would be a mistake.
Though labeled as anti-inflationary, the IRA was primarily a climate action spending bill. At its signing President Biden boasted that it “invests $369 billion to take the most aggressive action ever — ever, ever, ever — in confronting the climate crisis.” Those “investments” included a panoply of tax credits and subsidies, including a $7,500 give away for buying electric vehicles, a benefit that primarily went to the affluent. These financial incentives weren’t crafted with clear sunsets, and estimates for what these programs will cost US taxpayers have ballooned, reaching as high as $1.2 trillion (through 2032) less than a year after the law’s passage. The total bill will be much higher.
The IRA saddled taxpayers with other unexpected costs. The law reworked Medicare Part D, granting a generous $2,000 cap on out-of-pocket expenses on prescription drugs. But as a consequence, Part D premiums skyrocketed, with insurance plans demanding a 400% increase in just two years to cover their growing costs.
In an attempt to disguise the spike in premiums the Biden administration implemented a “demonstration project,” an unauthorized taxpayer subsidy to insurance companies in excess of $5 billion a year to offset costs they would otherwise pass on to senior citizens in an election year.
The IRA’s drug program, particularly the price setting regime it established for drugs purchased by Medicare, was supposed to save the government money. Biden declared it would “save the federal government $160 billion over the next 10 years.” Importantly, Democrats added it to the bill to offset climate spending, not to ensure Medicare’s continued solvency, and in so doing effectively siphoned hundreds of billions from seniors to benefit a population that is younger, healthier, and richer.
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But promised savings haven’t materialized as hoped. In August the Biden team claimed to have saved $6 billion from the first round of negotiations, a generous self-assessment at best, given that private negotiators claimed to have done better than the government on 6 of the 10 drugs involved. But that bogus figure didn’t account for the Part D demo project and it’s $5 billion per annum price tag.
In October CBO reported that spending on Part D would be $10 to $20 billion higher than projected leading some experts to question whether the IRA’s drug program would deliver any real savings at all. And all those green energy subsidies? Just more deficit spending.
The IRA hasn’t just increased the burden on US taxpayers, it’s diminishing choice and access to drugs and drug coverage. The destabilization of Part D caused the number of standalone plans seniors could choose from to drop 11% in 2024 and another 26% for 2025, reaching the lowest number in the program’s existence. Some insurers have left the Part D market altogether.
Meanwhile independent pharmacies, which comprise nearly 1 in 3 retail pharmacies across American, are unsure if they will even carry drugs that are part of CMS’ price fixing scheme. It seems in their haste to write the IRA, Democrat lawmakers failed to account for how these pharmacies would be compensated.
Most concerning though is how the IRA wrecked incentives for innovation and investment in new life-saving medications. Even before the bill’s passage, companies began hedging their bets and cancelling research. A recent study by the National Pharmaceutical Council conducted by the National Pharmaceutical Council points to a 35.8% decline in Phase I and II trials since the IRA became law indicates a 35.8% decline in Phase I and II trials since the IRA became law.
With so much evidence of the IRA’s ills mounting, and its much-ballyhooed savings largely discounted, the Trump administration has ample reason to put it on the chopping block. A legislative fix will take time, particularly with all that is on the president’s agenda. In the interim, President Trump shouldn’t feel compelled to execute, much less save, Democrats’ bad policy.
The IRA’s excesses make it a natural target for DOGE, which should prioritize clawing back billions in green energy subsidies the Biden team is trying to shovel out the door like gold bars being thrown off the Titanic. Musk and Ramaswamy could also pare back the size of government by unwinding the office created to execute Biden’s price setting agenda, at a cost to the taxpayers of $3 billion.
Apart from DOGE’s efforts and until such time as lawmakers can repeal it, the president should press “pause” on the IRA.
Joe Grogan is a Nonresident Senior Scholar at the USC Schaeffer Institute and served as director of the White House Domestic Policy Council under President Donald J. Trump. He consults for pharmaceutical companies.
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