Americans deserve lower prices for prescription drugs. But we also need newer and better drugs that treat chronic illness and keep us healthier. The free market is the only tool that can deliver both lower prices and new, effective medicines. Socialism can’t and won’t.
This matters today, because unfortunately, the Trump administration may soon be swayed by the idea that is has to “do something,” and that something may end up being the imposition of price controls.
As the 2020 election looms, Trump’s Health and Human Services department is pushing something called the “International Pricing Index.” IPI would imports price controls from socialist nations and impose them in the U.S. That might lower prices for a few months, but it would cause harm in the long term.
For proof, just look at gasoline.
In the 1970s, oil producing nations imposed an embargo to squeeze supply and increase prices. The American government reacted by imposing price controls that limited how much providers could charge for gasoline. The problem was that nobody was willing to produce or sell oil at that price.
“The shortages were, in fact, a byproduct of price controls imposed by President Nixon in August 1971, which prevented oil companies from passing on the full cost of imported crude oil to consumers at the pump,” CATO analysts Jerry Taylor and Peter Van Doren wrote. The shortages only ended in the 1980s, after President Ronald Reagan lifted price controls. Oil companies, freed up to make money again, soon flooded the market with fuel. Prices went down and have basically stayed down since.
It’s not magic. It’s markets.
Something similar could happen with prescription drugs. As 2019 was winding down, Democrats in the House of Representatives raced through a bill called the “Elijah Cummings Lower Drug Costs Now Act.” Again, the title sounds good.
But a key approach would be federal price controls imposed by HHS on many drugs. “Prices for those medicines would be benchmarked to government-set prices in countries such as Austria, Ireland, Greece, Czech Republic and a dozen others,” the Chamber of Commerce notes. “This will reduce American seniors’ access to life-saving drugs, inhibit innovation, and ultimately threaten our nation’s free-market health care system.”
As a thought experiment, ask how many prescription drugs are developed in Greece or the Czech Republic. Those countries have low prices, but low levels of innovation. If we import only what they have developed, we’ll lose access to most life-saving drugs.
In a similar vein, countries with socialist health systems can set prices for drugs because they can simply refuse to provide those drugs to patients. People in those countries don’t set health care policy, and they miss out on drugs that cure Americans.
The Trump administration has admitted this in the past. “Many governments, particularly in Europe, have paired large coverage expansions with the imposition of price and spending controls,” the annual Report of the Council of Economic Advisers noted in 2018. “These centralized controls may have an adverse impact on medical innovation and make healthcare less effective and more costly to obtain in the future.”
Republicans in the Senate seem poised to block the House bill, as they should. Lawmakers may be able to compromise this year and bring costs down by agreeing to reform Medicare Part D (itself a rather socialist approach to drug pricing), but giving (HHS) the authority to set prescription drug prices is a bridge too far.
Most new medicines are developed in the United States and launched here. That innovation creates jobs in the pharmaceutical industry and even as it delivers new treatments. It’s a virtuous cycle, made possible by free markets. Socialized medicine doesn’t work overseas. We shouldn’t import it.
Dan Perkins is an author of both thrillers and children’s books. He appears on over 1,100 radio stations. Mr. Perkins appears regularly on international TV talk shows, he is current events commentator for seven blogs, and a philanthropist with his foundation for American veterans, Songs and Stories for Soldiers, Inc. More information about him, his writings, and other works are available on his website, DanPerkins.guru. To read more of his reports — Click Here Now.
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