The Foolishness of Prescription-Drug Price Controls

Asia's Tech News Daily

Here is a fact that you will seldom hear cited in Congress: Prescription-drug prices have been declining — for years — even as consumer prices elsewhere in the economy have been rising sharply.

The Foolishness of Prescription-Drug Price Controls
© Graeme Jennings/Pool via Reuters Sen. Bernie Sanders, (D., Vt.) questions former Michigan Governor Jennifer Granholm during a hearing to examine her nomination to be Secretary of Energy on Capitol Hill, January 27, 2021.

Prescription-drug prices declined by more than 3 percent between April of 2019 and April of 2021. For comparison, gasoline prices are up 50 percent in the past year.

But never mind the facts: Emerging from his lakeside dacha to thunder with denunciations of “greed” and “corruption,” Senator Bernie Sanders, the Vermont socialist who dominates the Democratic Party in spite of his not being a member of it, is making an eleventh-hour press for pharmaceutical price controls.

This is a fundamentally stupid idea but an old and popular one, embraced not only by left-wing populists such as Senator Sanders but also by right-wing populists such as Donald Trump, whose rhetoric was indistinguishable from that of the creaky old socialist when he declared that “drug companies are getting away with murder” and that the only proper response was federal price controls. President Trump was at least less coy: He called for federal action that would see Washington “setting prices,” while most supporters of the proposal pretend that it is a matter of “negotiating” them.

Of course, drug prices already are negotiated — that is what markets do. If sellers had the ability to unilaterally set prices with no input from buyers, a Big Mac would cost $50 and a Ford pickup would cost $100,000. Consumers — both end-users and intermediaries such as insurance companies — get a say, too. They can use the magic word: “No.”

True, some medical expenses are life-and-death matters in which patients will pay any price to get what they need, but most are not. It also is true that our markets are distorted by too much reliance on “third-party payers,” which dampens consumers’ price-sensitivity. Unsurprisingly, we have seen the most effective negotiation of drug prices in those situations in which consumers are paying out-of-pocket and thus encouraged to pay careful attention to prices. This sometimes produces weird results — name-brand Viagra still costs about 40 times the price of its generic equivalent — but it also produces good results overall. And that is why — in spite of the rhetoric we must endure from Senator Sanders et al. — prescription drug prices have been in fact declining in recent years, according to BLS data. That decline is even more remarkable in the context of so much inflation elsewhere in consumer prices.

Senator Sanders proposes to “fix” a problem that already is well on its way to being solved organically.

Hysterical critics charge that Democratic skeptics such as Senator Kyrsten Sinema must somehow have been corrupted by the pharmaceutical interests, but our actual national experience with price controls is enough to awaken the suspicion of responsible Democrats as well as Republicans. We know from long and unhappy experience that price controls do not produce low prices — price controls produce shortages and rationing. We have seen this in Venezuela under socialism, we have seen this in the United Kingdom in the pre-Thatcher era, and we see this in American cities where rent-control laws have produced housing shortages for buyers and renters with low-to-moderate incomes. Some Americans — at least, those as old as Senator Sanders — should also remember the failure of wage and price controls under Richard Nixon. The underlying economic mechanism is easy enough to understand: With a few exceptions, price controls are designed to force sellers to sell at below-market prices, and sellers respond by abandoning those unprofitable (or less-profitable) products and producing more profitable products instead. That is precisely what pharmaceutical companies have been warning of in the matter of federal price “negotiation” — rather than lose money selling drugs at artificially discounted prices, they will stop selling those drugs altogether and focus their businesses on more profitable products.

But that is only one possible way for these “negotiations” to go wrong. The same people who complain about the pharmaceutical industry throwing its money around to lobby against price-negotiations never seem to appreciate that if Plan A fails, then Plan B is to use that money and lobbying power to work to dominate the price-negotiation process and tilt it in its own favor. We have seen that dynamic at work in plenty of other contexts, which is why multi-billion-dollar agribusiness concerns and favored manufacturers enjoy various federal subsidies and price protections. Federal price supports and regulation are why you already are overpaying for milk and sugar and for everything that contains milk or sugar.

This is, at heart, a philosophical problem.

While it is true that “socialist” too often gets thrown around as a vague term of abuse, to understand the congressional fight over prescription-drug pricing it is necessary to understanding that the chairman of the Senate budget committee, Bernie Sanders of Vermont, is a professing socialist. We understand that the Democrats had to do something with Senator Sanders, but putting a socialist in charge of the budget committee was always a terrible idea — the Special Committee on Aging would have been a better fit for Senator Sanders, who not only is old enough to remember the old Soviet Union but is old enough to have honeymooned there. Senator Sanders is a radical who remembers when a red state was a red state.

Senator Sanders believes that imposing a command-and-control model on pharmaceuticals will magically take scarcity out of the picture, when all of the historical evidence argues that it will only make scarcity much more acute. Command-and-control policies do not solve economic problems — they replace one set of problems with a new and generally worse set of problems, replacing many economic actors and decisionmakers with a single powerful decisionmaker. The closest things we have to socialized medicine in the United States are Medicaid, which is a disaster, and the veterans’ health-care system, which is a national disgrace.

If central planning were the way to achieve abundance and affordability, Venezuelans wouldn’t have been reducing to butchering zoo animals for food.

There are things we can do to make prescription drugs and other health-care products and services more affordable. The process for getting new drugs approved is too long, too expensive, and too cumbrous — and the lightspeed deployment of COVID-19 vaccines shows that we can move more quickly while moving safely. And while U.S. patent law has been a boon to pharmaceutical innovation, there is some room for improvement there, too, particularly with regard to “evergreening,” the strategy of using superficial changes to pharmaceuticals to extend patent protection and keep generic competitors out of the marketplace. Unfortunately, the most important and most effective strategy is also one of the least popular: shifting medical costs away from third-party payers onto consumers themselves, thereby enabling the emergence of an ordinary, price-sensitive consumer market for most medical goods and services.

The market for health care, like every other market, is a delicate ecosystem. Senator Sanders proposes to throw Molotov cocktails into it. As it stands, we have an abundance of prescription drugs at prices that have been modestly declining. We can build on that, letting markets and innovation do their work while providing financial support where needed and careful regulation where warranted.

Or we could try putting some shiftless socialist dingbat who has never held down a real job in charge of our health care and see how that works out.

More on National Review

Internet Explorer Channel Network
Asia's Tech News Daily
News Related


Georgia outlines plans to improve slow pace of rental help

ATLANTA — Georgia officials struggling to distribute federal funds to prevent evictions have outlined plans to increase the speed at which they get the money to landlords and renters. The ... Read more »

German far-right AfD party cancels congress due to COVID

BERLIN — The far-right Alternative for Germany, which has opposed many of the country’s pandemic restrictions, has canceled its planned party congress next month due to the surge in coronavirus ... Read more »

EU nations agree to impose ban on travel from southern Africa to counter new COVID-19 variant

BRUSSELS — EU nations agree to impose ban on travel from southern Africa to counter new COVID-19 variant. Read more »

Fears Covid super-strain Omicron is already in UK as 1st case confirmed in Europe & passengers banned from leaving plane

A NEW Covid super-strain was officially named a “variant of concern” by the WHO tonight – amid fears it has already spread to the UK. A dramatic video showed passengers ... Read more »

Sleep deprivation damages older kids' brains, new study reveals

SLEEP deprivation damages the brains of older children, a world-first study suggests. Experts looked at the effects of taking a long time to nod off, waking up often, abnormal breathing ... Read more »

What is the Omicron variant?

AS the Coronavirus pandemic continues to take countless lives, the World Health Association has warned against a new variant that could make its way to the United States. It is ... Read more »

Asda and Morrisons start selling halal turkeys in pioneering supermarket move

Asda and Morrisons are pioneering supermarket sales of halal turkeys. The birds, slaughtered to meet religious criteria, will be in stores where demand is highest. Frozen food brand Humza is ... Read more »

The Match: Brooks Koepka vs. Bryson DeChambeau

Brooks Koepka and his caddie Chase Koepka celebrate after winning The Match V. Brooks Koepka, left, and Bryson DeChambeau shake hands after Koepka won. Bryson DeChambeau looks on from the ... Read more »

Police evacuate shoppers after a mall shooting in Durham, North Carolina

Durham Police Chief Patrice Andrews confirmed there were at least three victims. One suspect has been detained by the police. Read more »

Bell scores 39, No. 25 FGCU tops Tennessee Tech 81-69

SAN JUAN, Puerto Rico (AP) — Kierstan Bell, the nation’s leading scorer, poured in a season-high 39 points to lead No. 25 Florida Gulf Coast to an 81-69 win over ... Read more »

Quinerly scores 18 points, No. 10 Alabama beats Drake 80-71

LAKE BUENA VISTA, Fla. (AP) — Jahvon Quinerly scored 18 points, Jaden Shackelford and Juwan Gary each had 14, and No. 10 Alabama beat Drake 80-71 in the consolation round ... Read more »

Pelicans' Zion Williamson cleared for full team activities, but return still uncertain

NEW ORLEANS — New Orleans Pelicans forward Zion Williamson has been cleared to participate in full team activities, the club announced Friday, but there remains no specific timetable on when ... Read more »

Mohamed scores 25 to lift Montana St. past Portland 69-66

SAN ANTONIO (AP) — Abdul Mohamed had a career-high 25 points as Montana State narrowly defeated Portland 69-66 on Friday. Amin Adamu had 15 points for Montana State (2-3). Jubrile ... Read more »

Rangers beat Bruins, Gallant off to record start as coach

BOSTON (AP) — Artemi Panarin scored the first of New York’s three third-period goals with 8:25 left and the Rangers beat the Boston Bruins 5-2 on Friday, giving Gerard Gallant ... Read more »

Rakell, Stolarz help Ducks end skid in 4-0 win over Senators

ANAHEIM, Calif. (AP) — Rickard Rakell had a goal and an assist, Anthony Stolarz made 34 saves and the Anaheim Ducks beat the Ottawa Senators 4-0 on Friday. Troy Terry ... Read more »

Jets' Quincy Williams making his own name as fierce tackler

FLORHAM PARK, N.J. (AP) — Quincy Williams has been tackling his way out of his younger brother’s massive shadow for years. The New York Jets linebacker, who’s almost 16 months ... Read more »

Williams clutch in OT, Oklahoma St. tops Oral Roberts 78-77

TULSA, Okla. (AP) — Bryce Williams scored four of his 21 points on back-to-back turn=around jump shots late in overtime and Oklahoma State held on for a 78-77 win over ... Read more »

Reese scores 19 to lead No. 9 Arizona over DePaul 75-68

ST. THOMAS, U.S. Virgin Islands (AP) — Arizona coach Adia Barnes always expects opponents to give her ninth-ranked Wildcats their best game. That’s what Arizona got from DePaul on Friday ... Read more »

Smith scores 22 points, No. 19 Auburn beats Syracuse 89-68

PARADISE ISLAND, Bahamas (AP) — Jabari Smith scored 22 points and No. 19 Auburn beat Syracuse 89-68 on Friday in the fifth-place game at the Battle 4 Atlantis. K.D. Johnson ... Read more »

Brown's 3 TD runs help UAB beat UTEP 42-25

BIRMINGHAM, Ala. (AP) — Jermaine Brown Jr. ran for three touchdowns, Dylan Hopkins added two TD passes and UAB beat UTEP 42-25 on Friday in the regular-season finale for both ... Read more »

An angry Artemi Panarin throws his glove at Brad Marchand from the Rangers' bench

Who throws a glove? It’s New York Rangers star Artemi Panarin, who was on the New York Rangers’ bench and was chirping at the Boston Bruins star Brad Marchand, who’s ... Read more »

Pelicans' Williamson cleared for full team work at practice

NEW ORLEANS (AP) — Pelicans forward Zion Williamson has been cleared to participate in full team activities, the club announced Friday, but there remains no specific timetable on when the ... Read more »

Alex DeBrincat scores in OT, Blackhawks beat Blues 3-2

CHICAGO (AP) — Alex DeBrincat scored 1:27 into overtime and the Chicago Blackhawks overcame an early two-goal deficit to beat the St. Louis Blues 3-2 on Friday. DeBrincat beat Jordan ... Read more »

Harvey hits late 3, No. 18 USF women beat No. 7 Stanford

NASSAU, Bahamas (AP) — Sydni Harvey’s 3-pointer from the wing with 2.8 seconds left sent No. 18 South Florida to a 57-54 win over seventh-ranked Stanford in the Baha Mar ... Read more »

Omicron COVID-19 variant: Moderna announces strategy for addressing new variant

Moderna is testing existing vaccine boosters and looking at a variant-specific booster to address Omicron Read more »

Sebastian Aho scores twice, Hurricanes beat Flyers 6-3

PHILADELPHIA (AP) — Sebastian Aho scored twice, Jesperi Kotkaniemi had a goal and an assist and the Carolina Hurricanes beat the Philadelphia Flyers 6-3 on Friday. Jesper Fast, Steven Lorentz ... Read more »

Ole Miss dominates in 2nd half, beats MVSU 73-58

OXFORD, Miss. (AP) — Nysier Brooks scored 12 of his 15 points in the second half when Robert Allen scored all of his 11 and Ole Miss defeated Mississippi Valley ... Read more »

Black Friday 2021 Xbox Series X, Series S and Xbox One deals at Amazon, Walmart and more

— Recommendations are independently chosen by Reviewed’s editors. Purchases you make through our links may earn us a commission. Microsoft first introduced the Xbox to the world 20 years ago ... Read more »

Stephen Sondheim, iconic Broadway composer and lyricist, dies at 91

Stephen Sondheim’s death comes after a highly decorated career as one of the most celebrated composers in the 21st century. Read more »

Kaprizov has goal, three assists as Wild rout Jets 7-1

ST. PAUL, Minn. (AP) — Kirill Kaprizov scored and tied a career high with three assists to help the Minnesota Wild rout the Winnipeg Jets 7-1 on Friday. Mats Zuccarello ... Read more »

Stephen Sondheim: His life in musicals

Composer and lyricist Stephen Sondheim, pictured here in 2005, was one of the most inimitable musical theater artists of his generation. He died Nov. 26 at his home age age ... Read more »

Jackson scores 21 points, Clippers beat Pistons 107-96

LOS ANGELES (AP) — Reggie Jackson scored 21 points and the Los Angeles Clippers got back on track with a 107-96 victory over the lowly Detroit Pistons on Friday. After ... Read more »

Disney+, Hulu and more—the best Black Friday 2021 streaming deals you can get

— Recommendations are independently chosen by Reviewed’s editors. Purchases you make through our links may earn us a commission. Some great deals are going up this year for Black Friday, ... Read more »

The best New Balance deals you can shop on Black Friday 2021

— Recommendations are independently chosen by Reviewed’s editors. Purchases you make through our links may earn us a commission. ‘Tis the season for holiday shopping and saving. With Black Friday ... Read more »

San Jose Sharks general manager Doug Wilson taking temporary leave for medical issue

SAN JOSE, Calif. – San Jose Sharks general manager Doug Wilson will take a temporary leave to deal with an undisclosed medical issue. The Sharks said Friday that assistant general ... Read more »

Stephen Sondheim, musical theater legend behind 'Sweeney Todd' and 'Into the Woods', suddenly dies

No one instilled words and music with more wit, wisdom and warmth than Stephen Sondheim. The composer and lyricist died Friday at his home in Roxbury, Connecticut at age 91, ... Read more »

Save hundreds on iPhones, Galaxy phones and more during Black Friday 2021

— Recommendations are independently chosen by Reviewed’s editors. Purchases you make through our links may earn us a commission. Black Friday is here. If you or someone you know is ... Read more »

eBay Black Friday is here: Shop the best deals on Bose, JBL and more

— Recommendations are independently chosen by Reviewed’s editors. Purchases you make through our links may earn us a commission. If you’re on the hunt for deals this Black Friday, eBay ... Read more »

The best mattress-in-a-box brand we've tested is offering up to $600 off for Black Friday

— Recommendations are independently chosen by Reviewed’s editors. Purchases you make through our links may earn us a commission. We love a good night’s rest at Reviewed. Regardless of whether ... Read more »
On you will find lots of free English exam practice materials to help you improve your English skills: grammar, listening, reading, writing, ielts, toeic