American innovation has shepherded our country to a promising stage of recovery from the pandemic. By the end of May, every American may be able to receive at least one dose of a COVID-19 vaccine. The groundbreaking technology that powers the vaccine has been in the works for years, thanks in significant part to the U.S. free-market system of modest taxes and light-touch regulation..
Unfortunately, some on Capitol Hill appear unwilling to recognize this achievement, and seem ready to make the same policy mistakes they did in the previous Congress. Speaker Pelosi is preparing to reintroduce H.R. 3, a sweeping prescription drug bill that previously included foreign drug price controls. The Speaker may call her plan an “international price index,” but it is a thinly veiled price-fixing scheme.
These proposals would enable the government to set a maximum drug price based on what other countries with socialist health care systems pay, and would punish companies that fail to accept the government-set price with up to 95-percent excise taxes. Because of this, Americans will have access to fewer life-saving medications. After all, price controls undermine the ability to innovate. Taxpayers, who are counting on drug discoveries to save money on hospital stays and surgeries over the long run, lose out as well.
Our nation’s leading economists have long seen the danger of these proposals and spoken out against them. In fact, more than 150 economists penned an open letter to policymakers, calling on them to reject dangerous foreign price controls.
The letter was originally addressed to HHS Secretary Alex Azar but applies to current public officials now just as well.
Highlights from the letter include:
“Implementing a reference pricing system in the United States would create price controls that bring with them the same types of harms these policies have caused in foreign countries, to the detriment of the health care system at large and investments in U.S. research and development.”
“In this case, price controls can lead to a reduction in patient access to certain drugs, less investment in the research and development of new drugs, and cost-shifting that raises the prices of other therapeutics. Ultimately, patients will suffer as cures are delayed or entirely undeveloped, while taxpayers will be denied potential savings from drugs that could obviate more expensive treatments in government healthcare programs, and the investment of capital in development of new medicines.”
The letter concludes, “Policymakers looking to reform drug pricing models should reject price controls and instead pursue alternative market-based approaches that would lower prices, expand access, and encourage more innovation.” Two and a half years after those words were first written, the economists’ advice remains sound.