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The Road to Price Controls
...When the pharma deal inevitably forces premiums—and in turn government costs—higher, it will reignite calls for drug price controls. Conveniently, the Obama plan already gives Medicare the legal tools it needs to impose them.

That authority flows from the new Independent Payment Advisory Board (IPAB). Its mandate is to cut $4 billion a year from Medicare’s spending, mostly by reducing payment rates. One way is to ratchet down existing price schedules. More efficient (and ruinous to the drug industry) would be to merely import into the Medicare benefit the lower government drug pricing schedules required by Medicaid and the Pentagon. IPAB will focus mainly on medical products, since providers like hospitals have exempted themselves from the board’s focus.

The Obama plan releases IPAB’s decisions from judicial review, the need for advance public notice, or even appeals from patients. The administration envisions that its decisions will be too unpopular to subject to public scrutiny, and for good reason. Its inevitable target will be the more expensive, but also most novel, “single source” medicines. These are drugs that don’t have treatment alternatives because they represent unique innovation. For that reason, they also command a premium, precisely because they are effective and have few therapeutic alternatives....