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Democrats’ Price Control Scheme Will Be Disastrous for U.S. Healthcare System

Posted on Monday, September 26, 2022
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by AMAC Newsline
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27 Comments
Democrats

AMAC Exclusive – By Tom Campbell

Since passage of the Orwellian named “Inflation Reduction Act” (IRA) last month, Democrats have promised that the new legislation will lower prescription drug costs and cap the price of some medications. But while these measures may appear like good policy on the surface, they are actually thinly-veiled government-imposed price controls that are sure to lead to disaster for patient health outcomes and the quality of the U.S. healthcare system.

In their efforts to curry public support for their inflation legislation, Democrats tirelessly repeated that the bill would authorize Medicare to “negotiate” drug prices with pharmaceutical companies. On the surface, this may seem like a good idea; doing so could save taxpayers money by reducing the price the government pays for certain drugs. However, in any fair negotiation, both sides are required to make compromises.

In this case, “negotiation” looks a lot more like government coercion. Under the provisions of the new law, pharmaceutical companies that do not comply with the “negotiations” and accept the price government bureaucrats give them face an excise tax of up to 95 percent on sales of drugs not sold at the negotiated price. Thus, far from being a true negotiation, the Democrats have instituted a “take it or leave it” approach that will end up with imposing socialist-style price controls.

This type of government intervention in the market never works as the politicians claim it will. In 1971, President Nixon imposed price controls throughout the country. This harmful policy led to ranchers not sending their cattle to market and consumers clearing out supermarket shelves. Perhaps the most recognized image is that of gas station lines extending down highways as consumers waited hours to fill up their vehicles. Stations ran out of gas, and laws dictated the days on which Americans were allowed to purchase gas. Ultimately, Milton Friedman’s prediction that Nixon’s price controls would end in “utter failure and the emergence into the open of the suppressed inflation” turned out to be accurate.

Like the price controls of the 1970s, the ones contained in the Democrats’ new inflation legislation are destined to have the same negative effects. This is because, as basic economics tells us, price controls reduce supply while increasing demand, which leads to shortages. The likely result will be Americans having fewer new medications available to them because pharmaceutical companies will be disincentivized from investing in research and development. A study by the Congressional Budget Office (CBO) estimates that 15 fewer drugs will be developed over the next 30 years due to the IRA’s price controls. Another study that examined 110 currently approved therapies for a number of ailments found that only six would have made it to market if the bill’s provisions had been in place prior to their development.

It is also likely that these new price controls on some drugs will cause prices of other drugs to increase, adversely affecting all consumers. Prices, after all, are market signals that indicate to producers there is a profit to be made, leading to more investment and production. Just as it is anywhere in the market, competition is the best way to drive down the price of medicine for the consumer long term.

If congressional Democrats truly want to lower the price of medicine, they should turn away from centralized control and open up the drug market to even greater competition. Currently, the Food and Drug Administration (FDA) forces companies who want to produce cheaper generic versions of drugs to wait 12 years before they can enter the market, while also imposing increasingly more difficult approval processes. Congress could help drive down the prices of pharmaceuticals by making significant reforms at the FDA that remove the burdensome regulatory barriers to market access, such as bringing lowering the exclusivity period for new drugs. Congress should also curtail the agency’s ability to require prescriptions for certain medicines. In the case of insulin, patients frequently purchase the drug and are very familiar with what doses they need. Removing the requirement for a prescription would cause the price of insulin to fall.

While price controls are often politically popular, particularly in a time of high inflation, any short-term gain will have to be paid for in the future. When considering price controls on medicine, we cannot overlook that Americans’ health will suffer as a consequence. It may be true that patients today will pay lower prices for medicine, but future patients could have less affordable options. Worse, many could die waiting for new drugs that now will no longer be developed in their lifetimes.

Tom Campbell is the pen name of a Washington, D.C.-based professional with more than a decade of policy and legislative experience at the state and federal levels of government.

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Letts Brandon
Letts Brandon
1 year ago

When pharmaceutical companies patent drugs they must do so when they are still in the development stage so they do not actually get 12 years to recoup costs and make a profit. Your idea of lessening this time frame would only accomplish the exact same thing the price controls do. Part of the reason drugs cost so much is the very high cost of development. Some drugs could actually be cheaper if the patents lasted longer. Of course this would require a lessor amount of greed on the part of the manufactures. It is not an easy solution to come up without some kind of control which I don’t think they have come up with yet.

Michael J
Michael J
1 year ago

Everything the government touches becomes a disaster. Minimum wage is one of them, price control always backfires for the ones who should benefit.

David Millikan
David Millikan
1 year ago

Same Lenin and Stalin tactics.

Casey C Matt
Casey C Matt
1 year ago

These price caps are just a nicer way of introducing slow euthanasia for older citizens. You really believe that the finest medications are going to be introduced into a price controlled market? Nope

BiggyD
BiggyD
1 year ago

Monopolies are discouraged in this country, and in many cases illegal. For a company to invent a life saving or life improving drug and get it approved, it could cost many, many millions of dollars. It is patented and a monopoly is invented. Not only do they have a right to recover their investment, but also make a decent profit. The profit is, after all, the incentive for conducting the research in the first place. This is capitalism. But it is a monopoly, and negotiation with the public over profits, recovery terms etc, must be considered. Draconian measures often demanded by the left, are not the answer.

Michael Lewis
Michael Lewis
1 year ago

Free market economy has been preached to me as an underpinning of American greatness since I was a kid. So much for “free markets”!

Lynn
Lynn
1 year ago

AMAC, you’re now talking out of both sides of your mouth. Your social action attachment asks for action to tell congress to impose price controls on drugs but then you publish this. What double talking garbage. You’ve lost credibility,

Kyle Buy you some guns,and learn how to shoot
Kyle Buy you some guns,and learn how to shoot
1 year ago

It”s just a question of time before the Govt. pays for all medical. Doctors will work for the Govt. All drugs will be handled by the Govt. You will go to a Bldg. like a DMV and sit there for 2 hours waiting on your prescription, only to be told they are out of your drug. No idea when more will be in. NO THE DRUGSTORES wont have any drugs. If you can find one still in business. Kyle L.

TOMASD
TOMASD
1 year ago

Once again, there is no common sense with the democrats. They seem to love to implement policies that have time and time agains shown to be failures. It is the definition of insanity, “doing the same thing over and over again, yet expecting a different outcome.” The thing that is most troubling is that too many Americans are just blind followers and will vote democrat no matter what.

Jeb
Jeb
1 year ago

Big pharma will just find another way to screw us over. Does anyone really believe they will just agree to accept less money for their drugs…just out of the goodness of their hearts…

tika
tika
1 year ago

price controls are socialist central government tools that never work

anna hubert
anna hubert
1 year ago

There are those who are truly sick and need all the help they can get and there are those who are sick as a result of their own irresponsible habits.The two are not the same and should not be treated as such People need to take responsibility for their own well being and not count on the meds

Nebular Novice
Nebular Novice
1 year ago

I agree with most of your article. However you need to rethink things like lowering the exclusivity period for new drugs. Like price controls, that seems to be a good thing, but in fact it also lowers the profit from developing a new drug. This will somewhat reduce the incentive to develop new drugs.

Susan Chamblee
Susan Chamblee
1 year ago

The negotiated price is for Medicare and Medicaid programs. The price for the rest of the American public will go way up to offset big pharma losses from those 2 government programs. We will have a lot of people walking around sick since they can’t afford to buy meds at the new higher prices. That puts all of us at risk of exposure to illnesses. If government really wants to help, they should put a cap on how much a big pharma company’s profits can be for the USA share of their income. Also the USA tax payer government grant money they get for R&D should be counted as taxable income since it is offend used to suppress cures from others if they don’t hold the patent on it. Law against “predatory” capitalism need to be passed on all fronts, not do away with capitalism as a whole. Monopolies need to be broken up as well. Laws need to be passed stopping our meds from being manufactured by other countries such as China and India, both are “BRICKS” counties with bad records for keeping contamination out of the products. They can’t be trusted or held accountable in any meaningful way.

Splish_Splash
Splish_Splash
1 year ago

The best thing that can happen to the American Medical System is DISASTER -THEY HAVE BROUGHT US THE COVID PLANDEMIC CATASTROPE THE KILL SHOTS AND THE BOOSTER SHOTS THAT COMPLETE THE DEATH SHOTS. THEY HAVE BROUGHT US DRUGS MADE FROM PETROLEUM DISTILLATES AND GET OLDER PEOPLE ON MULTIPLE DRUGS. DISASTER FOR THE AMA IS A GOOD THING!

Nick
Nick
1 year ago

Think wage and price controls under Nixon. This is the party that cannot tell us what a woman is. But they can tell us what the temperature of the Earth is going to be in 50 years. As the commenter below astutely pointed out anything the government touches turns to garbage

Elaine O
Elaine O
1 year ago

Whatever the government touches is going to fail. They can’t even balance a simple budget issue…which is basics–you can’t spend more than the tax revenue collected. 2+2 still equals 4, disregard the the new math the answer is what it always has been, no guessing allowed.
Congress has been asleep at their desks or out campaigning and are more interested in feathering their own personal nests than taking care of their elected duties to the tax payers.

We have a figurehead for President, with mysterious others (who are not elected) leading our country and a legislative body that are pushing non essential papers while our nation is sliding down to a 3rd world country.

How do we fix this without an armed revolution (which is not what we need) then we can end up like Cuba.
Just my thoughts.

CoNMTX
CoNMTX
1 year ago

In other words, same old, same old. Surely no one can believe a demo/globalist will ever do anything that is not disastrous for America. That’s their goal. Completely destroy the country and build back socialist/globalist. That’s what happens when you elect Godless socialists to the highest office of the land.

Stephen Russell
Stephen Russell
1 year ago

We dont need Price Controls: Give US Competition OK

Dan W.
Dan W.
1 year ago

Questions for “Tom Campbell”:

Were the limits on hospital and doctor fees imposed by Medicare Parts A and B in 1965 “actually thinly-veiled government-imposed price controls that [led] to disaster for patient health outcomes and the quality of the U.S. healthcare system.” ?

If not, how are these limits imposed on Medicare Part D drug fees expected “to lead to disaster for patient health outcomes and the quality of the U.S. healthcare system” when the limits on hospital and doctor fees imposed in 1965 did not ?

Laura
Laura
1 year ago

Who’s making these decisions anyway? Not only are they suppressing competition (which is probably their aim), but the powers that be (the FDA as well as other weapons of the government) are putting people’s lives at stake. They probably see that as a bonus! Maybe knock off some of those “Boomers” along the way. I trust the FDA about as far as I can throw them!

PaulE
PaulE
1 year ago

Price controls were proven to be completely ineffective in the 1970s as both political parties tried them to varying degrees. All they succeeded in doing was create shortages of the items being controlled, which inevitably led to higher prices for the limited supplies available. The Democrats, America’s Socialist Party, seem committed to reviving every failed political and economic idea they’ve already used over the last 100 years as part of the transformation of this country into a failed and bankrupt socialist Utopia.

Most of us here are old enough to know how each of these moves by the Democrats will end, as we have already lived through a least one, if not more iterations of these bad policies in our lifetime. Still the American people seem largely content to simply sit back and allow the Democrats to systematically destroy the country from within. That is the biggest disappointment in all of this.

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