Operation Healthcare Mission Creep Continues with Drug Prices
Congress is currently considering a massive multi-trillion-dollar spending package that will not only fuel already high inflation but inject even more government into the healthcare system. The “Build Back Better” package is a continuation of operation healthcare mission creep that is increasingly harming patients.
We’ve seen this story before. The fallout from Obamacare is a cautionary tale of what can happen when more government is shoved in between patients, their doctors, and prescribed treatments. As the law was being white knuckled through Congress in 2010, proponents claimed that giving Uncle Sam control over more puppet strings would lower costs, expand access, and improve healthcare quality by providing patients with more choice.
Time has proven these predictions to be decidedly wrong.
Average family premiums have ballooned by 47 percent over the past decade, outpacing inflation and wage growth. Middle class families with incomes on the margin that don’t qualify for healthcare subsidies are being financially squeezed. Between 2016 and 2018, 2.5 million people that didn’t qualify for aid left the Obamacare marketplace altogether. And today, residents in more than half of U.S. counties have access to two or fewer insurer options on health exchanges.
Translation: While more Americans can get health insurance cards because of Obamacare, rising premiums and deductibles, as well as regulatory restrictions, make actually accessing the care individuals want more challenging.
Now, as the healthcare system continues to spiral, Washington is looking to double down on the failed experiment of government intervention into healthcare. As part of Biden’s budget reconciliation package, lawmakers are proposing a series of price controls for prescription drugs. Rising medicine prices are a serious problem that warrants action, but as we experienced with Obamacare, more government is not the solution.
More specifically, the bill would empower the federal government to purchase some drugs for Medicare at a fraction of the market price. If drug manufacturers don’t like the price point the government is willing to pay, they can be whacked with a 95 percent excise tax. In other words, it’s a deal they can’t refuse.
The government meddling will create a domino effect that adversely impacts more than 200 million Americans who receive private health coverage. Drug companies spend, on average, more than one billion dollars to bring a new product to market. To recoup the investment, losses associated with government price setting for Medicare will be pushed onto employer-sponsored health plans and other private options. That means although some people will be able to access cheaper medicine, others will get hosed with even higher prices.
But don’t worry, Washington has a plan to address the unintended consequences created by government. Hint: It’s more government!
The spending package includes a provision that caps “allowable” price increases on all drugs to the rate of inflation. What happens when drug manufacturers are unable to profit, or even break even, on newly developed products? The free market incentive to innovate and create is weakened and patients would ultimately pay the price. Fewer new therapies, treatments, and vaccines would become available to consumers as the rate of healthcare innovation slows.
Rather than relying on government strong-arming, policymakers should use the free market as a tool to rein in the cost of medicine. Price transparency is key. And a good first step would be to shine a spotlight on Pharmacy Benefit Managers (PBMs), which use their position as middlemen of the drug supply chain to profit greatly at the expense of patients struggling to afford medicine at the pharmacy counter.
PBMs enjoy special protections from federal anti-kickback laws. They should be playing by the same rules as everyone else.
More government is rarely the answer to economic challenges. The price of healthcare is no exception. Congress and the Biden administration should reconsider applying price controls on prescription drugs. It will create more problems than it solves.
Dr. Katarina Lindley is a board-certified family medicine physician, President-Elect of the Texas Chapter of the American Association of Physicians and Surgeons, and a member of the Job Creators Network.