The Biden Administration released a drug pricing plan that is full of the typical government overreach that is included in any Democratic healthcare policy. The President’s promise of “cheaper prescription drugs for all Americans” is about as true of a promise as President Obama’s, “if you like your doctor, you can keep your doctor” when Biden served as Vice President. The real guarantee behind the administration’s pharmaceutical plan is typical government overreach and hidden costs.
President Biden’s plan would boost the government’s monopoly on seniors’ healthcare choices to set drug prices. This will be done by allowing Medicare to “negotiate” the price of a drug, and the plan promises to set a “fair” price, but at the end of the day, the price set by the government won’t be the fair market value of the drug. While price setting would result in lower costs to Medicare, it has consequences for everyone else, the first being increased prices on all other Americans.
Additionally, the executive branch seeks to punish companies that refuse to comply with this agenda through its taxing power. If a company increases prices for any reason other than inflation, whether it is to correlate to market demand increases, supply chain disruptions (which often require sourcing more expensive ingredients), or new regulations, then the President would tax the company as punishment.
Over the past year, it has become abundantly clear that the administration lacks simple economic understanding. And is of no surprise that the administration would lean on price controls as a short-term solution, creating even longer-term problems. Only last September, White House Press Secretary, Jen Psaki, claimed it was “absurd and unfair” that companies would raise prices for consumers due to Biden’s tax increases. It has never been the American way for the government to dictate what price is fair. The market does an efficient job of that when left to its own devices.
Similar to the Administration’s narrative that the $3.5 trillion spending bill would have a true cost of zero dollars, Democrats are trying to hide the real cost of Biden’s drug plan. The majority party was able to hide two-thirds of the costs by delaying the price-setting on drugs that would increase the price of the plan to “outside the budget window.” This is Washington’s speak for hiding costs to make the plan look cheaper than it really is. The only problem is that Speaker Pelosi introduced a version of the plan showing the full cost at three times the Biden version.
There are less costly, long-term solutions to make prescription drugs more affordable for seniors. Addressing transparency in the drug manufacturing industry and other costly market participants like drug market middlemen, called Pharmacy Benefit Managers (PBM), are low-hand fruit. All of which this proposal ignores.
President Biden is trying not to rock the boat in several crucial ways that could actually help patients while going full bore on the worst proposals. This mix of half-measures and government overreach will ensure that the patients who need lower costs are the least served. Real reform would look towards free-market fixes rather than government price controls and fixing existing programs to ensure they are serving consumers, not corporate interests.