OPINION:
President Biden finally has decided inflation is not transitory. In a recent speech, he argued not only that we need to fight inflation but that the federal government needs to impose price controls on drugs as part of the strategy. The truth is that price controls will cause more inflation.
When Congress was debating the legislation that created Medicare Part D, the prescription drug benefit, then-Rep. Henry Waxman, California Democrat, wanted to set the monthly premium for Part D plans at $41. Otherwise, he said, it would soon be too high for most to afford.
Mr. Waxman’s proposal failed, and it’s a good thing. Average premiums were in the high-$20s when the program began and didn’t reach $41 until 2019, and several of the largest plans still sell for less than $30 per month. Part D beneficiaries have more choice in plans than ever, more flexibility in terms of cost and more satisfaction among users than virtually any other government program.
In fact, better than 5 in 6 say the premiums are affordable and the variety is favorable, and 3 out of 4 say the out-of-pocket costs are reasonable and all needed medicines are covered.
Moreover, the Centers for Medicare and Medicaid Services says Part D has cost the federal government about 40% less than expected over its first 10 years, and that the main reason for the savings is that it has not allowed the government to participate in drug price negotiations.
So naturally, those who want to “do something” about drug prices are at it again. Battling economic headwinds and significant erosion of support, Mr. Biden is swinging for the fences in an attempt to revive his flailing presidency.
Mr. Biden said in a speech on June 3 that he not only wants to give Medicare the power to negotiate with the pharmaceutical companies but also to set the price of insulin — and if the insulin makers won’t meet it, to simply quit buying insulin.
Hope all that works out for you, diabetics of America.
It would be one thing if the government had demonstrated any competence in this area. Mr. Biden says insulin costs $10 to make, so it should be sold for no more than $35 per month. But when it came to COVID-19 vaccines, they cost $1 to make and Biden eagerly agreed to pay $28 per dose, not only for Americans but for people around the world.
It would be another thing if letting the government into the negotiations would indeed bring about lower prices. The perception is that government represents so many patients that drug companies would be forced to lower prices to sell in its high-volume market.
The Congressional Budget Office has studied the matter repeatedly and concluded allowing the government to get involved in the negotiations would not lower drug prices and could limit what drugs are available. Some drugs indeed would be pulled in favor of less-expensive alternatives if the government’s low-ball negotiating strategies were imposed.
The Medicare/Medicaid trustees have acknowledged that private negotiations are indeed producing big savings for taxpayers already. Negotiations reduce the price of prescription drugs by an average of 25% to 30%, they say — success that would be undermined by letting the government negotiate.
The administration clearly is looking for a lifeline and willing to do permanent damage for temporary perceived gain. Witness its selloff of the petroleum reserve, which at best can negate a few pennies of increase in the price of gas for a few days.
And voters seem to see it that way as well. Recent polling by Morning Consult showed that 50% of those over 65 enrolled in the program say they do not want the government to get involved in drug negotiations for fear of what the federal government might do if it could limit which drugs were available under Medicare. Only 30% favored such a proposal.
“What we see seniors saying is that the Part D program is making the medicines they need accessible and affordable, so why make radical changes to what is clearly working,” Mary Grealy, chair of Medicare Today, said of the poll.
Ms. Grealy is right. Mr. Biden and Democrats in Congress want a headline that they “did something about drug prices.” They neither know nor care that what they want to do would drive up costs and limit availability for the people who actually use the program.
At this point, the president should simply admit the facts and say he’s going to help by not helping.
• Brian McNicoll, a freelance writer based in Alexandria, Virginia, is a former senior writer for The Heritage Foundation and former director of communications for the House Committee on Oversight and Government Reform.
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