HR 4: Displacing the Market With Government's Heavy Hand
First, Do No Harm
By Pat Cleary Posted in Economy — Comments (7) / Email this page » / Leave a comment »
Further to Pejman's excellent post below:
"When you get in bed with the federal government," Ronald Reagan famously said, "You get more than a good night's sleep." Today, as part of its "100 Hours" march, the Congress will try its level best to foul private sector success with the heavy hand of government. At issue is H.R. 4, the bill that will allow the US Government to negotiate directly with pharmaceutical companies when purchasing drugs for the newly-enacted -- and highly successful -- Medicare Part D program. On its face, it sounds great, as do most "100 Hours" items: Let the government use its enormous buying power -- sort of like Wal-Mart on (prescription) steroids -- and presto, watch the prices plummet. Only problem is, it doesn't work.
Unfortunately for the proponents of this bill, there are far too many real-life examples of government-negotiated prices for pharmaceuticals. In those that come immediately to mind both here and abroad -- the EU, Canada, Medicaid and the Veterans Administration (VA) -- it's been a miserable failure, serving only to reduce beneficiaries' access to medication. The plain truth about the VA plan -- held up by liberals as the most shining example of how this can work -- is that the VA keeps prices low by limiting drug choices.
According to this article in yesterday's WaPo, "VA prices are also low because VA, which prescribes medications for 4.4 million veterans annually, has a relatively narrow formulary, or list of approved drugs. The agency secures big discounts from the manufacturers of a few drugs in each class by promising not to offer competing drugs." Prices may drop, but so do the number of drugs available to seniors. Lost in the shuffle are some of the newest, most effective medicines. In fact, this recent Weekly Standard article notes that a mere 19 percent of prescription drugs approved since 2000 and 38 percent of those approved from 1990-2000 are available through the VA prescription drug plan. Not a single drug regarded as a priority medicine by the Food and Drug Administration since 2000 are available under the VA plan.
At core, this debate is about whether lawmakers put their trust in the market or the government. This year alone, premiums for the drug benefit under Medicare Part B is 40% lower than originally expected as drug makers compete for their share of the market. As Robert Goldberg points out in the Weekly Standard piece, above, some 2 million VA beneficiaries have voted with their feet, leaving the land of government-negotiated prices for Medicare Part D. The promise of lower prices evaporates in the face of fewer choices. Said the non-partisan Congressional Budget Office in a letter to House Energy and Commerce Committee Chair John Dingell (D-MI) on Wednesday:
"CBO estimates that H.R. 4 would have a negligible effect on federal spending
because we anticipate that the Secretary would be unable to negotiate prices
across the broad range of covered Part D drugs that are more favorable than
those obtained by [prescription drug plans] under current law."
While Congress debates a better deal for the nation's seniors, the market is working. Those intent on injecting the heavy hand of government into Medicare Part D would do well to heed the warning of a famous Greek doctor: "First, do no harm."
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HR 4: Displacing the Market With Government's Heavy Hand 7 Comments (0 topical, 7 editorial, 0 hidden) Post a comment »
I'm all for narrowing the list of drugs that are covered as much as possible. It will control costs. It is the next best thing to getting rid of the benefit. If seniors want drugs that aren't on the list, they can pay cash for them. If they aren't willing to pay for them themselves, why should the taxpayers do it? If they are so poor they can't afford to buy their own drugs, they can get them out of the Medicaid system.
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Underlying most arguments against the free market is a lack of belief in freedom itself. - Milton Friedman
because they've failed to make the link between their failure to follow the small but focused government policies conservatives want, and they still haven't made the connection to the "thumping" they just got in the last election.
I am rather vexed by H.R.
4, so yesterday I exercised my First Amendment right to “petition
the government for a redress of grievances.” In other words I emailed my
Congressmen and communicated my worries about H.R. 4. I would like to
encourage other individuals who are not pleased with various bill currently in
Congress to contact their respective representatives.
Over
the last few years I have been affiliated with various pressure groups, some by
choice others, and others not. One point that has consistently been made
by all these groups is that elected officials will change their positions and
voting patterns if they feel that their constituents are strongly for or against
a certain bill or issue. I have been told over and over that as little as
two or three dozen individualized (non-form) emails or letters from different
people can get elected representatives at the state level to change their
positions. Obviously it would probably require more than a couple of dozen
constituents' emails and or letters to get a Congressman or Senator to change
their positions, but if enough principled Conservatives express their displeasure
to their elected representatives, then perhaps we could prevent the passage of
at least a few bills that will hurt this country.
I
therefore beseech all Conservatives to use their First Amendment right and express their concern
with H.R. 4,
and all other bills that would detrimentally affect the economy, the character
of the young, and the God given right to individual liberty.
P.S.
These links make it extremely easy to email your Congressman
and Senators.
...a long habit of not thinking a thing wrong, gives it a superficial appearance of being right...
---Thomas Paine---
How would H.R. 4 limit anyone's choice of drugs? If it passed and your prefered drug was not on the Part D list, you could always go out and spend your own money to buy it. All H.R. 4 says is that if you want taxpayers to pay part of your bill, you have to purchase from the list of drugs available at the cheapest price.
H.R. 4 is no more or less free market than Wal-Mart requiring that it's stores let Bentonville negotiate prices with suppliers on behalf of all stores.
Markets only work when there is a sufficiently large group of sellers and buyers so that no single buyer or seller can control the price at which a good is sold; that is the market sets the price. A legitimate concern with WalMart is that it is getting large enough to have an effect on the prices manufacturers offer it for the goods it sells, outside of efficiencies the organization may or may not have. Fortunately, so far there are enough other buyers and sellers that it's ability to set prices from manufacturers has been at best marginal. Don't get me wrong, I like WalMart and shop there regularly, and I strongly disagree with attempts to force WalMart to "pay a living wage" or "provide real health care benefits." But that doesn't mean they don't have the potential to engage in monopolistic pricing which distorts the market.
The problem with any Federal drug benefit is that they make WalMart look like a bunch of pikers when it comes to market domination. And therefore there is a great deal of danger of market distortions when the federal government sets prices for drugs. Because make no mistake about it, "negotiating drug prices" is just the latest Democrat/Socialist euphamism for their plans to control our lives. What they mean by "negotiate" is "set the price we think we ought to be paying without regard to real costs to research, develop, and manufacture you will incur to make the product." And with it will go the implied threat of what will happen if the manufacturer decides that because the feds have set the price too low they can no longer afford to manufacture that drug.
And I guess that explains our democratic leaders precisely. The federal gov't does not "negotiate". If you doubt that, try to persuade them to increase the amount of your FDIC insurance. Or try to negotiate your tax rate. Or try to negotiate your emissions control devices.
Right after they "negotiate" lower prices for their own drug expenses, they will proceed to "negotiate" with the drug companies as to whether or not they would rather sell them the drugs for that price or lose their FDA approval.
I meant what I said and I said what I meant. An elephant's faithful 100 percent.
Should there even be a Medicare Part D?
Didn't large numbers of elected Republicans -- yes, amazingly, the men and women from Ronald Reagan's very own party -- "get in bed with the federal government" when they created the pharmaceutical program in the first place (per instructions from President Bush, Karl "anything-for-a-victory-this-fall" Rove, and House leadership who kept the vote open for two hours while twisting every arm they could find)?
I will tell you this much: it's impossible for me to have "a good night's sleep" whenever I allow myself to think of the myriad ways in which the Bush administration and the Republican leadership in Congress have defiled the legacy of Ronald Reagan and Barry Goldwater over the past 6+ years. Hope they enjoyed the power they thought they were maintaining.