Is the US importing socialist drug pricing policies?

The Trump administration is doing an admirable job of keeping its promise to reduce costs and protect Americans by rolling back excessive regulations.  In January, for example, it announced a major reform package to update the "Waters of the United States" rule.  It's rolled back the cost of many other regulations as well.

However, all these regulatory savings could be easily offset by a huge jump in costs if the administration goes ahead with plans to empower federal bureaucrats to set prescription drug prices.  Further, American lives could eventually be at risk.

Remember the emotional debate over rationing boards and "Death Panels" that were the logical outcome of a single-payer health care system?  It is possible that if the U.S. imports price controls from foreign nations, they might also import rationing boards, because all the nations that use price controls in Europe have rationing systems for health care services.

"The Department of Health and Human Services (HHS) has proposed a new policy — known as the International Pricing Index (IPI) — ­­that would set certain drug prices based on an international benchmark," the U.S. Chamber of Commerce warns.  "As proposed, the rule would affect many life-saving drugs administered to patients in hospitals and doctor's offices under what's known as Medicare Part B."  The Chamber adds that "this will reduce American seniors' access to life-saving drugs, inhibit innovation, and ultimately threaten our nation's free-market health care system."

That's because the federal government would be setting prices for prescription drugs, tying them to prices charged in European countries.  Those countries also have rationing boards, so once you import price controls, another cost-cutting step is to set up panels to deny care: death panels.  

Meanwhile, even as they put people at risk, price controls don't work.  As the Cato Institute wrote years ago, price controls have been imposed historically on everything from important products (food) to frivolous ones (TVs).  In every case, the controls led to a shortage of the item people wanted; nobody would produce it at that price.

That would be true here as well.  Instead of the robust drug market Americans now take for granted, we could have a stunted market that doesn't help people.  The pipeline of drugs would dry up if companies were prevented from profiting from their innovations.  Lives that are now being saved would be lost.

The House of Representatives is pushing for these price controls, though.  Price controls are a key pillar of a bill the House passed late last year.  That measure seems to be dead on arrival in the more conservative Senate (and it deserves to be).  But an election year is no time to take anything for granted.  Americans, especially seniors, could see their access to important drugs reduced if lawmakers enact socialist prescription drug policies.

"Conservatives have long opposed price controls because they utilize government power to forcefully lower costs in a way that distorts the economically-efficient behavior and natural incentives created by the free market," explains a coalition of more than 55 conservative organizations.  "When imposed on medicines, price controls suppress innovation and access to new medicines.  This deters the development and supply of new life saving and life improving medicines to the determent of consumers, patients, and doctors."

President Trump knows this.  As his administration's 2018 economic report put it: "government policies and public insurance programs have unintended consequences that prevent, rather than foster, healthy price competition and induce artificially high prices.  To promote patient welfare, government policy should induce price competition.  However, in the two main Federal insurance programs, Medicaid and Medicare, current policies dampen price competition, thereby artificially raising prices."

That's a call for less federal intervention, not more.

HHS shouldn't borrow the policy that's failing in Medicare and Medicaid and apply it to the entire prescription drug market.  Doing so would only increase costs and bring the risk of death panels to American shores.

Mike Daugherty is CEO and Founder of LabMD, a cancer detection laboratory based in Atlanta, Georgia.  He is author of The Devil Inside the Beltway: The Shocking Expose of the US Government's Surveillance and Overreach into Cyber-Security, Medicine and Small Business.

The Trump administration is doing an admirable job of keeping its promise to reduce costs and protect Americans by rolling back excessive regulations.  In January, for example, it announced a major reform package to update the "Waters of the United States" rule.  It's rolled back the cost of many other regulations as well.

However, all these regulatory savings could be easily offset by a huge jump in costs if the administration goes ahead with plans to empower federal bureaucrats to set prescription drug prices.  Further, American lives could eventually be at risk.

Remember the emotional debate over rationing boards and "Death Panels" that were the logical outcome of a single-payer health care system?  It is possible that if the U.S. imports price controls from foreign nations, they might also import rationing boards, because all the nations that use price controls in Europe have rationing systems for health care services.

"The Department of Health and Human Services (HHS) has proposed a new policy — known as the International Pricing Index (IPI) — ­­that would set certain drug prices based on an international benchmark," the U.S. Chamber of Commerce warns.  "As proposed, the rule would affect many life-saving drugs administered to patients in hospitals and doctor's offices under what's known as Medicare Part B."  The Chamber adds that "this will reduce American seniors' access to life-saving drugs, inhibit innovation, and ultimately threaten our nation's free-market health care system."

That's because the federal government would be setting prices for prescription drugs, tying them to prices charged in European countries.  Those countries also have rationing boards, so once you import price controls, another cost-cutting step is to set up panels to deny care: death panels.  

Meanwhile, even as they put people at risk, price controls don't work.  As the Cato Institute wrote years ago, price controls have been imposed historically on everything from important products (food) to frivolous ones (TVs).  In every case, the controls led to a shortage of the item people wanted; nobody would produce it at that price.

That would be true here as well.  Instead of the robust drug market Americans now take for granted, we could have a stunted market that doesn't help people.  The pipeline of drugs would dry up if companies were prevented from profiting from their innovations.  Lives that are now being saved would be lost.

The House of Representatives is pushing for these price controls, though.  Price controls are a key pillar of a bill the House passed late last year.  That measure seems to be dead on arrival in the more conservative Senate (and it deserves to be).  But an election year is no time to take anything for granted.  Americans, especially seniors, could see their access to important drugs reduced if lawmakers enact socialist prescription drug policies.

"Conservatives have long opposed price controls because they utilize government power to forcefully lower costs in a way that distorts the economically-efficient behavior and natural incentives created by the free market," explains a coalition of more than 55 conservative organizations.  "When imposed on medicines, price controls suppress innovation and access to new medicines.  This deters the development and supply of new life saving and life improving medicines to the determent of consumers, patients, and doctors."

President Trump knows this.  As his administration's 2018 economic report put it: "government policies and public insurance programs have unintended consequences that prevent, rather than foster, healthy price competition and induce artificially high prices.  To promote patient welfare, government policy should induce price competition.  However, in the two main Federal insurance programs, Medicaid and Medicare, current policies dampen price competition, thereby artificially raising prices."

That's a call for less federal intervention, not more.

HHS shouldn't borrow the policy that's failing in Medicare and Medicaid and apply it to the entire prescription drug market.  Doing so would only increase costs and bring the risk of death panels to American shores.

Mike Daugherty is CEO and Founder of LabMD, a cancer detection laboratory based in Atlanta, Georgia.  He is author of The Devil Inside the Beltway: The Shocking Expose of the US Government's Surveillance and Overreach into Cyber-Security, Medicine and Small Business.