Some believe that government first emerged from the practices of bandits who, tired of marauding, settled down and established dominion over a single locality’s inhabitants. These newly stationary bandits demanded from their subjects taxes and fealty in exchange for protection — or so the theory goes. Some days, modern governments seem scarcely to have changed from this nascent state.

The Inflation Reduction Act empowered the Department of Health and Human Services to impose de facto price controls on prescription drugs provided through Medicare . President Joe Biden ’s administration announced the first 10 covered drugs last week. This program, which weds petty tyranny with grand larceny, fails on economic, public health, and constitutional grounds.

The IRA, which did nothing to curb inflation, seems misinformed of many ordinary words’ meanings. It says Medicare will “negotiate” drug prices with manufacturers. But the process involves “negotiation” only in the sense that an armed mugger “negotiates” for his victim’s wallet. Companies cannot contest the prices HHS will unilaterally set, and the IRA explicitly insulates the agency’s determinations from judicial and administrative review.

The IRA requires HHS to demand at minimum a 25%–60% discount from market rates, and it encourages the agency to gouge even deeper. Moreover, officials may make these determinations arbitrarily — and without soliciting public comment.

Should firms balk, they must either remove all their products from Medicare (Parts B and D) and Medicaid or submit to a so-called “excise tax.” The former option constitutes an economic impossibility for drug companies and a potential medical crisis for their patients. Washington has acquired ineluctable market power. Medicare Part D and Medicaid patients amount to nearly half of American prescription drug spending, and drug companies cannot afford to boycott its markets.

“Excise tax” is another misleading label since this charge functions less as a tax than as a punitive deterrent. According to the Congressional Research Service , “The excise tax rate would range from 185.71% to 1,900% of the selected drug’s price depending on the duration of noncompliance.” The Congressional Budget Office and the Joint Committee on Taxation estimate the tax would generate no revenue — for no drug company could ever pay so excessive a penalty. Thus, the federal government has barricaded the pharmaceutical industry’s escape at both front and back doors.

While populist politicians and commentators enjoy decrying “Big Pharma,” “corporate greed,” “price gouging,” and the like, high drug prices in fact stem largely from high development costs. Stifling, risk-averse federal drug-approval regimes have foisted vast monetary and paperwork burdens on would-be innovators. However, rather than deregulating to lower the costs it imprudently imposed, the federal government now seeks to strip drug companies of their financial incentive to innovate.

On average, developing a single drug requires more than $2 billion and 10 to 15 years of research and clinical trials. Of compounds that begin preclinical testing, 99.98% fail to gain the Food and Drug Administration’s approval. Pharmaceutical companies must maintain 62.2% margins on successful products to average a 4.8% overall rate of return, according to a 2018 CBO report . The Biden administration’s efforts to slash prescription drug prices, though not their production costs, alter none of these underlying economic conditions.

Basic economics says that when a product’s production costs rise and its sales revenues fall, firms will produce less of it. By excising manufacturers’ incentive to produce, price controls lead invariably to stunted innovation, worse product quality, and supply shortages. The pharmaceutical industry has no special immunity from this basic economic phenomenon.

Australia has a price-fixing regime and has experienced crippling medication shortages. In fact, less than half of all medications launched in the U.S. over the past decade have found their way to the Land Down Under. Even for medications that are given the go-ahead, Australians must wait an average of 19 months longer to access these medications than their American peers.

Biden’s price fixing will slow pharmaceutical investment , delaying Americans’ access to life-saving treatments. Indeed, a meta-analysis from the Information Technology and Innovation Foundation reports, “Academic studies consistently show that a reduction in current drug revenues leads to a fall in future research and the number of new drug discoveries.”

Several pharmaceutical companies, trade groups, and others have marshaled constitutional challenges to the IRA’s drug-price “negotiation” scheme. First off, the law delegates to the HHS vast, unguided, virtually unconstrained authority to set prices unilaterally (and more), which likely violates the constitutional separation of powers and the nondelegation doctrine . The “excise tax,” moreover, likely violates the Eighth Amendment’s interdiction of excessive fines. And the IRA further coerces drug manufacturers to attest that HHS-set rates are “fair,” a likely violation of the First Amendment’s protections against compelled speech.

Manhandling markets and distorting prices seldom produce the economic benefits technocrats promise. The IRA has joined such economic illiteracy with obfuscatory language and constitutional violations. The law’s pharmaceutical price-fixing deserves to meet its doom in court.

David B. McGarry is a policy analyst at the Taxpayers Protection Alliance.