Sometimes meals served the second time can be delicious. But if they were badly prepared at all, they would never taste good. The same goes for overheated health policies, as patients and taxpayers are about to discover.
Very soon, the Biden administration and its allies in Congress could introduce a package of laws to combat the cost of prescription drugs, and some form of harmful government price controls will certainly be an unsavory holdover on the menu.
The Democrats’ bill is likely to resemble the plan of House Speaker Nancy Pelosi from the previous Congress, House Resolution 3. One of the most objectionable elements is a “negotiation process” that only negotiates on behalf. That “negotiation” would have set the government a maximum price Medicare would pay for a prescription drug based on what other countries with socialized health systems would pay, and would have given companies that do not accept the government-set price up to 95 Percent punish excise taxes. The Speaker of the House of Representatives might refer to this provision as the “international price index,” but it is a barely disguised pricing scheme.
Unfortunately, proponents of price controls aren’t limited to the democratic side of the aisle. The Trump administration issued several ill-considered orders that would link Medicare’s payment for certain drugs to a similar international price index or composite of prices paid in “Most Favored Nations”. Because these orders were limited to some drugs in government programs, the excise tax was omitted – but moreover, the concept was uncomfortably similar to what Pelosi’s bill contained.
Whether patients would see a big difference in out-of-pocket expenses from either of these plans remains controversial, as other middlemen in the supply chain could devour most of the savings. But even if patients saved a few dollars in the short term, they would be hungrier in the long run. After all, counterfeiting the price of a good or service at below market prices has resulted in bottlenecks in the past – remember the government price controls on gasoline and the long lines of the 1970s?
What incentive must drug researchers have to innovate knowing that the government will arbitrarily cap prices without considering the massive cost – an average of $ 1.3 billion – of bringing a new drug to market? Drug development would slow patients’ access to life-saving medicines, and therefore patients too. At the same time, taxpayers will eventually lose. As reported by impartial sources such as the Congressional Budget Office and Harvard’s National Bureau of Economic Research, spending on initially expensive drugs tends to save money in health programs in the coming years by preventing more expensive surgeries and hospital stays.
These warnings are all too familiar to the experts. Just over two years ago, more than 150 leading economists came together to warn policy makers in an open letter that “price controls will reduce patient access to certain medicines, invest less in research and development of new medicines and This can lead to shifts in costs, which increases the prices for other therapeutics. Ultimately, patients will suffer when cures are delayed or completely undeveloped while taxpayers are denied potential savings from drugs that could avoid more expensive treatments in government health programs … “
Your words couldn’t be more relevant today.
The COVID-19 pandemic has shown how strongly the US market system can drive innovation. The United States has been a world leader in vaccine development due to years of private sector investment in new technology and critical infrastructure. Thanks to this investment, vaccines, which typically take years to develop, could be tested within a few months. Imitating the flawed drug price systems of socialist nations would stall this level of innovation. And given the new variants of COVID and the continuing need for treatment, nobody can afford to stop.
Washington can and should do better to cut prescription drug costs – without price controls. Steps include redesigning the Medicare Part D benefit, improving access to generic drugs, removing tax and regulatory barriers to research and development, and ensuring that trade deals encourage free market competition rather than government price controls.
Taxpayers and patients deserve prescription drugs better than stale leftovers from last Congress and Administration. After all of our nation is through with COVID-19, price controls should be uncomfortable and unthinkable.
Pete Sepp is President of the National Taxpayers Union. He wrote this for InsideSources.com.