OPINION:
Democrats rushed to impose destructive price controls on medicine in their reckless tax-and-spend bill. These provisions will reduce access to new cures and treatments and will increase, not decrease, health care spending at the expense of consumers. This is a lunge towards socialized medicine.
Democrats’ reconciliation bill gives the Health and Human Services Secretary the authority to “negotiate” the price of prescription drugs on behalf of Medicare, enforceable by a 95% excise tax on companies who charge more. Of course, a 95% tax enforcement mechanism creates a mandate — not a negotiation.
In 2023, the secretary will be able to determine the prices of 10 prescription drugs. The determined price would go into effect in 2026. The number of drugs the HHS Secretary could set prices for would then increase to 15 in 2028 and 20 in 2029.
The government is incapable of determining the equilibrium market price of any given product — it will always set the price of a product too low or too high. When the government sets a price of a product too low, as it will under the Democrats’ bill, it results in shortages. Drug manufacturers will not sell or create products they will lose money on. Simply put, this bill will stunt the creation of new medicines and access to existing medicines.
The U.S. is currently a world leader in medical innovation and access because it promotes free market competition. As a result, the majority of cures are developed in the United States and are launched years before other developed nations — which impose price controls — have access to them.
According to research by the Galen Institute, 290 new medical substances were launched worldwide between 2011 and 2018. The U.S. had access to 90% of these cures. By comparison, the United Kingdom had access to 60% of medicines, Japan had 50%, and Canada had just 44%.
Further, one study found that, over 20 years, Democrats’ price control provisions would reduce the number of new drugs introduced into the market by 135. Notably, the treatments that manufacturers will be discouraged from making will be highly effective ones that treat common but serious ailments. After all, these are the drugs price setters will deem most important to take control over. In this way, price controls will disproportionately discourage the innovations humankind needs most.
So, why have Democrats passed measures that depress medical innovation? Allegedly, to save Medicare money and reduce U.S. spending on health care. Recent research finds, however, that this proposal would increase total health spending.
Pharmaceutical treatments tend to alleviate the need for more expensive interventions like surgeries and hospitalizations. The introduction of more medicines reduces money spent on costlier interventions, thus reducing total health spending. Because Democrats’ bill discourages the flow of new medicines, it will increase total health spending.
Specifically, while price controls are supposed to raise $101.8 billion over ten years, a study by Tomas J. Philipson and Giuseppe di Cera out of the University of Chicago estimate that total health care spending would actually increase by $50.8 billion over a 20-year period, largely at the expense of consumers.
The authors’ results, as they note, “demonstrate that more medical innovation is cost-effective to consumers because new drugs create cost offsets, or reductions in total health care spending.”
If not to save money, the purpose of price controls is to ultimately yield control over all drug price setting. Imposing price controls through Medicare Part D, a program designed to rely on free market forces is just the first step.
Democratic Rep. Peter Welch — a cosponsor of the Medicare for All Act — said the quiet part out loud when he threatened that price “negotiations” are just the beginning of Democrats’ fight for socialized medicine. “Don’t underestimate the power of the slippery slope,” he bragged. “That’s exactly why pharma fights so hard. They know if we get price negotiation, it’s the beginning, it’s not the end.”
While so-called moderates like Sens. Joe Manchin and Kyrsten Sinema have opposed socialized medicine in the past, their support of ruinous price controls suggests they are unserious in their opposition.
Unfortunately, while the country struggles to pay for gas and groceries, congressional Democrats have prioritized measures that limit Americans’ access to medical cures and treatments while spending even more taxpayer dollars.
• Isabelle Morales is policy communications specialist at Americans for Tax Reform.
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