President Joe Biden on Tuesday announced a plan that Congress has already agreed to by relying on more aggressive price negotiations with the pharmaceutical industry to keep Medicare solvent.
The president claims this will result in $200 billion in savings.
The president is living in a fantasy.
In just over a decade, $200 billion? That’s quite a claim, according to the nonpartisan Congressional Budget Office, that such negotiations would have “a negligible impact on federal spending.” Talk about playing poker with money you don’t have.
The reality is that the main outcome of these negotiations is to send the US healthcare system down the slippery slope of federally mandated price controls, limiting patient choice and destroying the research-and-development system that has fueled US medical innovation. The world makes leaders.
Uncle Joe Fantasyland Part Two is that the Feds “talk.” In fact, Uncle Sam will set the price, and the only “negotiation” is “take it or leave it.”
As the CBO notes, “no further savings are possible unless the government limits beneficiaries’ access to drugs.”
Without putting too fine a point on it, price controls equal selection controls. Biden’s imagined Medicare scheme would literally and financially create a cycle of death.
Under his plan, the price of newer, more expensive drugs would be cut by up to 75%.
If companies don’t “negotiate”, they pay a fine of 95% of their gross revenue for that year.
Organized crime has never had such an impact. Talk about an offer you can’t refuse.
This is not a wild prediction. The US Department of Veterans Affairs plan reflects this. VA offers 1,300 drugs compared to 4,300 available under free-market-designed Medicare Part D.
The surprising result is that more than one-third of retired veterans choose to enroll in Medicare drug plans.
A Columbia University study found that the VA covered only 19% of all new drugs approved since 2000 — and just 38% of those approved since 1990.
VA negotiating strategies are driving some drug providers out of the program, leaving patients with fewer treatment options.
Fewer options result in poorer treatment outcomes, resulting in . . Sicker, more expensive patients.
And the costs of caring for people who are sick rather than healthy cause Medicare costs to rise. Oh no, Uncle Joe. Say it ain’t so.
Many high-impact, high-quality studies have shown that every $1 spent on new drugs saves Medicare $5.
In a very real way, the administration is trying to reduce costs that could be avoided by making existing drugs more readily available.
Price controls mean high risk and low reward for investors.
Biden has already secured a tough “negotiated” scheme in the Inflation Reduction Act.
Economist Toms Phillipson of the University of Chicago analyzed this and found that the reduction in research and development investment would result in a loss of 331.5 million life years in the United States because new drug programs would be canceled or never started.
That’s 31 times larger than the 10.7 million life years lost to Covid-19 in the US so far.
And again, spending to care for people who are sick rather than healthy will cause Medicare costs to rise.
Biden’s new plan would significantly accelerate these losses.
Uncle Joe has chosen to ignore reality in health-care policy because it doesn’t fit the shibboleths of his political agenda.
The predictable result of his obsession with price-control feeding is the significant disintegration of the R&D system that allows Americans the benefits of being the world’s top medical innovators.
At the heart of the debate is whether we’re going to reform our health care system using smart and evolving free-market principles or the good-guys of government negotiations (today) and rationing care (tomorrow). To go down the path.
The great American novelist Philip K. In Dick’s words, “Reality is something that, when you stop believing in it, doesn’t go away.”
Peter J. Pitts, a former Food and Drug Administration associate commissioner, is president of the Center for Medicine in the Public Interest and visiting professor at the University of Paris School of Medicine. Dr. Robert Goldberg is CMPI’s Vice President of Research Programs.
