The Case Against Prescription Drug Price-Fixing

When Congress passed the Medicare prescription drug bill in 2003, the intention was clearly for the program to be a competitive operation where private insurers and prescription drug sellers would be competing for business in a free market.  Indeed the legislation specifically prohibits the Secretary of Health and Human Resources from “interfering” in negotiations between drug manufacturers and pharmacies, or instituting “a price structure for the reimbursement of covered” drugs.

This free-market concept can be a little confusing to some people, so think of it this way:  Requiring the HHS secretary to negotiate and set prices for prescription drugs would be akin to requiring the Secretary of Transportation to negotiate and fix prices for automobiles.

It should go without saying, but allowing the government to “negotiate” prices with free-market private sector manufacturers will inevitably lead to the government setting those prices, just as the government has taken control of what the minimum wage a private employer must pay — all to “fix” what some politicians believe to be a “problem” with the high cost of prescription drugs.  

Perhaps now would be a good time to recall the immortal words of Ronald Reagan:  "Government is not the solution to our problem; government is the problem."

Nevertheless, the new Democrat majority in Congress wants to scratch the “non-interference” clause from the Medicare prescription drug plan and require the HHS secretary to start meddling in the pricing formulations — which some fear, and not without reason or precedent, will inevitably lead to capping the price on some drugs.  And that, boys and girls, will ultimately result in such drugs, some life-saving, becoming scarce.  It’s just plain market reality.

“But the Department of Veterans Affairs negotiates directly with drug manufacturers,” say the Democrats (and some confused Republicans).  “So why shouldn’t Medicare?”

Because we don’t, or shouldn’t, WANT the Medicare prescription drug program to be run the way our VA hospitals and health care programs are often run.  We should not only want better for Medicare, we should be DEMANDING better for our veterans.  Here, take a look at how describes the government-run operation which Democrats want Medicare to copy:

“Concerns have been raised about the conditions in Veteran Administration (VA) hospitals. Poor cleaning practices and even vermin have been found in some VA hospitals that could potentially spread infection.  Inspectors have found that some staff members are not properly supervised. False reports have been filed by some employees claiming essential medical devices like defibrillators have been checked and maintained, when they have not.

“Supervisors have been found missing when they were supposed to be working, and supervisors have been accused of giving their computer passwords to resident physicians, allowing them to co-sign their own reports without supervision.  At least 63 cases of malpractice have been found between 1997 and 2002 that resulted because of the failure of a supervisor to oversee residents, including misdiagnosis, surgical and medication errors, and inadequate care.

Yeah, that’s really a health-care model we want to duplicate, isn’t it?  Kinda like having FedEx use the post office for its business model.  Or having bank tellers emulate those fast, efficient folks down at the DMV.  Or having waitresses imitate the warmth and care provided by agents over at the IRS.

The bottom line is that even if the Department of HHS had the resources and capacity to negotiate the prices of every drug and plan, it shouldn’t.  Government one-size-fits-all price-fixing will backfire and hurt the very people the Medicare prescription drug plan was designed to help.  As the Heritage Foundation notes:

“The only real tool the government has that private plans do not is the ability to deny all seniors access to specific drugs if the manufacturers refuse a government-set price. … It would surely mean fewer drugs available to seniors, fewer innovative drugs developed in the future, and higher drug prices for consumers in the non-controlled private markets, who would be on the receiving end of the cost-shifting that always accompanies government price control strategies.”

The operative phrase in all things medical is: First, do no harm.  Congress ought to heed that sage advice and stop trying to turn the Medicare prescription drug program into the nightmare so many of our veterans now experience at the hands of government-run, price-fixed hospitals.