Last week, Sen. Bernie Sanders (I-VT) and other Congressional Democrats introduced new legislation that would permit the Department of Health and Human Services (HHS) to “negotiate” with (i.e., strongarm) drug companies in an attempt to lower drug prices for those enrolled in Medicare Part D. The proposal, which ends the “non-interference” clause, would not fix the problem Democrats claim it would. Taxpayers should oppose this proposal, as government negotiation would likely lead to price controls -- which, contrary to the sponsors’ claims actually cost health care programs more in the long run. .
While the Part D program is not perfect, it has been largely successful because it incorporates free market mechanisms, such as competition and consumer choice, to improve access and limit costs. According to the Congressional Budget Office, Medicare Part D costs 45 percent less than what was initially estimated between 2004 and 2013 and premiums for the program are about half of the government’s original projections. Expanded choice and affordability have created extensive support for the program, as nine out of ten seniors note satisfaction with the program’s coverage.
When government artificially mandates a price, it circumvents the market-established velie of a product that is set through supply and demand. When prices are held below that equilibrium level, vital resources such as labor and capital will exit the industry in search of greater returns elsewhere. The result, as NTU has noted before, will surely be less innovation and breakthroughs, and fewer drugs available to consumers.
The legislation also calls for the loosening of drug-importation rules. Implementing an importation policy is simply adopting market-distorting price controls from other countries, which often require drugs to be sold below market rates. Imported prescription drugs have the potential to threaten America’s status as the safest and most advanced nation in the world for medication. The best way to protect patients, and efficiently lower drug costs is to ensure medical innovation here in the United States.
This harmful policy will not strengthen American drug markets nor promote free trade. Drug manufacturers invest billions towards research and development for innovative drugs able to treat cancer and other pervasive diseases. The resulting therapies can actually control costs in taxpayer-funded health programs by preventing the need for more expensive surgeries and hospital stays. Rather, this legislation cedes jurisdiction to foreign governments, threatening intellectual property protections, safety, and America’s global economic and medical influence.
Should this proposal become law, future beneficiaries wishing to enroll in Part D would no longer have the range of treatments available to them today. As NTU wrote in a letter to Congress in 2015, “attempting to tighten the government’s grip on health care pricing would undermine the cause of free-market health care reform. Worse, it would bring us closer to emulating some of the single-payer type systems found in high-tax countries around the world. Indeed, single-payer legislation introduced in the U.S. Congress has been repeatedly scored by NTU’s research affiliate as precipitating annual increases in federal outlays of more than $1 trillion.”
Many problems in today’s health care market stem from excessive government intervention. This legislation would cause, not cure, headaches for seniors and taxpayers across the country.