USC experts are available to discuss the Inflation Reduction Act

August 16, 2022

Taipei Energy Hill solar park from above. (Photo/Anders J via Unsplash)

(Image credit: Anders J via Unsplash)

The Inflation Reduction Act signed today by President Joe Biden will cap out-of-pocket drug costs for Medicare beneficiaries, introduce additional taxes on corporations and and funds green tech expansion amid climate change. An estimated $390 billion is earmarked for electric vehicle tax rebates and investments into sustainable technologies and eco-friendly energy collection is the largest expenditure to address and mitigate the effects of climate change in U.S. history.

Below, USC experts in tech innovation and environmental policy address the strengths and weaknesses of the package.

Contact: USC Media Relations, or (213) 740-2215

Widespread EV adoption remains out of reach for most despite incentives

Headshot of Hovig Tchalian“Incentives solve one part of the EV puzzle, but you still need to solve the other. The problem with electric vehicles has always been adoption. You’re less likely to adopt unless you’re one of those people who stand in line to get the first Apple product.

“For most car buyers, EVs are unfamiliar. There’s anxiety about range and about the number of charging stations. There are multiple rebates in California. The messaging can be confusing, throwing a wrench into the works when people have a lot of other things to worry about.

“From my perspective, what will hold back the overall impact of the incentives is the amount they offer in relation to the price. If it’s going to cost you extra to buy an electric, the incentive has a zero effect.”

Hovig Tchalian is an assistant professor of clinical entrepreneurship at the USC Marshall School of Business. He studies the way new technologies impact the processes of market emergence.


Biden’s China competition is a long-haul fix

Headshot of Clayton Dube“The Chips and Science Act won’t have an important near term impact. Advanced semiconductor foundries take years and billions of dollars to build. It is true that government in Taiwan, South Korea and China have done much to subsidize companies in this sector. The U.S. is behind Taiwan and South Korea in its ability to manufacture the most advanced semiconductors. It’s ahead of China. Intel and Micron are the biggest American producers. Other American companies including Qualcomm, Nvidia, AMD, Broadcom, Apple, and IBM design advanced semiconductors that are actually manufactured by companies such as Taiwan Semiconductor (TSMC). The Act should encourage some firms to invest in chip foundries and some have already pledged to do so. We also need to continue to welcome foreign firms to invest in building plants here, as TSMC has done in Washington and is doing in Arizona. That diversification of their manufacturing serves the interests of the companies and of the U.S.

“By far the more important part of the CHIPS and Science Act is the investment into scientific research and education. This is not a quick fix either, but I think the returns on this investment are more certain. We need to remain at the technological cutting edge and can do that with competitive grants to U.S.-based researchers The National Science Foundation is well-equipped to carry out the mandate to support top researchers working on key challenges. The act also addresses our pressing need to strengthen the supply chain of talent by providing funding for successful training programs and promising students. These are good bets to help the U.S. remain a leader in these vital technologies.”

Clayton Dube is an expert in Sino-American relations and tech innovation. He is director of the U.S.-China Institute and professor at the USC Annenberg School of Communication and Journalism. His webinar on innovation and competition can be viewed here.


Rising prices for new drugs might be coming

“In the short run, we are likely to see launch prices of new drugs rise as manufacturers hedge their bets against the tax on price increases and the possibility of price negotiation in the years to come.

“Over the long run, the impacts of the bill are even more unknown. We know that price negotiation is likely to weaken incentives to innovate and reduce the number of new drugs launched. What we don’t know is whether the drugs we lose will be ones that would have had a significant impact on health.”

Darius Lakdawalla is an expert in health economics, drug patents and Medicare. He is director of research for the USC Schaeffer Center for Health Policy & Economics; Quintiles Chair in Pharmaceutical Development and Regulatory Innovation at the USC School of Pharmacy; and professor at the USC Price School of Public Policy.


New copay limits for insulin do little to drop total costs

Images for USC's Leonard Schaeffer Center for Health Policy and Economics on campus at USC in Los Angeles, California on Wednesday, December 12, 2018. Photo by Tracy Boulian and David Ahntholz, Tracy + David,

“Capping copays on high-value drugs like insulin will help patients and improve health. But the bill does little to address the overall cost of insulin and our work has shown that while the amount that manufacturers get has declined, the total cost of the drug has basically not changed. Intermediaries in the distribution system- pharmacy benefit managers, pharmacies and wholesalers — are capturing an increasing share of the pie.”

Karen Van Nuys is an expert on pharmaceutical economics and policy. She is executive director of the Value of Life Sciences Innovation project at the USC Schaffer Center for Health Policy & Economics and a research assistant professor at the USC Price School.

Other Available Experts:

Adam Rose is an expert on energy and climate change policy and economics. He is a senior research fellow at the USC Center for Risk and Economic Analysis of Threats and Emergencies (CREATE) and a research professor at the USC Price School of Public Policy.