Foreign-based drug price controls could import socialism into America’s health care system

By Aaron Rice
June 12, 2019

Everyone knows too well that gut punch when you receive a bill in the mail from a provider only to realize insurance has already been applied. Health care is expensive. We need a system that is firmly rooted in competition and market dynamics.

President Trump made lowering drug prices a campaign promise. To his credit, the president is working to address this issue. That’s why he tasked the Department of Health and Human Service Secretary Alex Azar to come up with a solution to address rising drug prices. We applaud this move by the President and support their objective of lower drug prices.

Unfortunately, Secretary Azar’s proposal to lower drug costs has an alarming feature — an “International Pricing Index” or IPI. This index would serve as a price control mechanism for Medicare Part B drugs sold in America. Part B drugs are the kind that are administered by a doctor usually as injections or infusions such as chemotherapy drugs, unlike the ones that are bought at a pharmacy and taken at home.

Alarmingly, the IPI would look at the prices of drugs in 14 foreign countries and use them as a base in the U.S. Many of these countries have socialized or government-controlled healthcare industries, and should not be looked to as an example for our own healthcare.

One of the reasons America is seen as the world leader in healthcare is the vast number of new drugs that are produced here. Because of our free market system, drug manufacturers can compete with one another to produce the best, most effective medicines in the world. Millions of patients all across the globe have benefited from a system of open competition that has led to the development of the majority of new drugs over the last several years.

However, the IPI could change all of that. Using artificial price controls could cut the legs out from under drug manufacturers and inhibit their ability to develop new, life-saving medicines. Producing a new drug is extremely expensive, sometimes costing as much as $2.6 billion for a single drug, according to Policy & Medicine. This is due to the high failure rate among experimental drugs, with 90 percent failing to gain FDA approval on average, according to BIO.

While the price of developing these drugs is high, it is necessary. Each new drug that makes its way to market has the potential to change millions of lives for the better. The IPI could be the start in taking that opportunity away from patients across the world.

Though the current proposal only applies to Medicare Part B drugs, if implemented, the IPI and other similar price control methods could quickly and easily spread to other areas of our healthcare system, and even to other industries. Socialism creeping into our economic model is dangerous. It does not work. It can sound good to certain segments of our population, but it has never worked. Wherever and whenever socialism has been tried, it has failed and humans have suffered by the millions. Competition and free markets do work and have made the United States the strongest economy in the world.

A better proposal was introduced in Congress that would lower prices for Medicare Part D drugs. The Medicare Part D Rebate Rule, as it is being referred to, would use free market solutions to lower drug prices instead of socialist price control measures. The rule would take the savings created through open negotiations between insurance plans and drug makers and pass those savings onto the sickest of seniors – not the middlemen who have historically pocketed the savings themselves.

Washington is doing the right thing by focusing on reducing drug prices and making healthcare access more affordable for patients all across the country. However, it is important that they remember to stick to using free-market solutions — like the Part D Rebate Rule — to accomplish this goal and stay away from using socialist price control mechanisms like the IPI.

This column appeared in the Clarion Ledger on June 12, 2019


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