Price controls are always bad medicine
Citizens Against Government Waste has long maintained that controlling pharmaceutical prices will not drive prices down or lead to fewer future cures. And efforts to fix drug prices are targeting one of the few commodities whose price has not risen substantially as the economy is hit by the worst inflation in 40 years. According to a July 15, the wall street journal editorial, drug prices have risen 0.1% over the past month and 2.5% over the past year. The editorial cited a January 2022 Congressional Budget Office report that “estimated the average net prescription drug price for the Medicare Part D program fell to $50 in 2018 from $57 in 2009 and $48 from $63 for Medicaid. This does not include lifetime savings to the healthcare system from treatments like hepatitis C drugs that cure most patients. Nonetheless, ongoing negotiations between Senate Majority Leader Chuck Schumer (DN.Y.) and Sen. Joe Manchin (DW.Va.) appear to have led to a OK give the federal government the power to determine the price of certain drugs.
When examining the Building back betterwhich passed in the House pharmaceutical price controls based on the provisions of HR 3, CAGW highlighted how they would destroy the vibrant American pharmaceutical industry and have devastating consequences for the American people. The negative impact of price controls was also noted in the ACGW’s November 2021 briefing, “Price Controls on Pharmaceuticals Are Bad Medicine”, which cited a report from the Budget Office of the Congress (CBO) of August 2021. report who found that price controls would have negative implications for drug development. In the third decade, Americans would see 9% less drug development, but that seems like a huge underestimate. One November 29, 2021, information note published by University of Chicago economists Dr Thomas Philipson and Troy Durie found that price controls in the BBBA “will reduce income by 12.0% through 2039 and therefore the database predicts that R&D spending will fall by approximately 18.5%, amounting to $663 billion. We see that this reduction in R&D activity results in 135 fewer new drugs. This drop in new drugs should generate a loss of 331.5 million years of life in the United States, or 31 times more than the 10.7 million years of life lost to date due to COVID-19 in the U.S. These estimated effects on the number of new drugs brought to market are 27 times greater than predicted by CBO.”
Falling drug prices sound impressive, and voters of all political persuasions are supportive until they learn the consequences, especially less future cures. A June 2021 Kaiser Family Foundation (KFF) survey found that nearly 88% of the public believe allowing the government to negotiate lower prices on medicines is a top priority. But when they find that allowing the government to negotiate lower drug prices would lead to less research and development of innovative drugs, favor drops to 32% and opposition rises to 65%.
It is time for senators to stop trying to fix a problem that does not exist. It is too dangerous for the government to decide the price of a drug. It would stifle innovation and research and undermine the global leadership the United States has developed in biopharmaceuticals, largely because other countries have imposed price controls on their healthcare systems. It would also reduce investment as the return on capital needed to develop new drugs would be limited. Taxpayers should tell their senators to just say no to drug price controls.