Hillary Clinton Wrong on Drugs

Here is a sentence you don???t see often in Washington these days ??? Tom DeLay was right.

In the summer of 2003, the former House majority leader from Texas kept his colleagues in session almost till dawn one night to all but force them to pass Medicare Part D ??? the prescription drug benefit.

It was good politics, he said at the time. And indeed it has been. It was an inevitable reform anyway ??? drug advances dictated as much. Democrats could not take credit for it. And the emphasis on market forces in its design made it efficient, effective and the kind of program even conservatives could be proud to be associated with.

Here???s another sentence, somewhat less rare ??? Hillary Clinton is wrong.

She wants to undo the way the government pays for drugs. She wants to cap the price of expensive drugs and change the law so government can negotiate directly for drugs reimbursed under Part D.

Hillary Clinton never has gotten over Part D, coming as it did only a few years after her own failed attempt to socialize health care. The high approval rates, the plunging cost projections, the small-government design for a big-government program now appears to have driven her to distraction.

She proposes a $250-per-month cap on the amount patients with chronic and serious medical problems would pay for out-of-pocket prescription drug costs. She accused drug companies of ???price gouging??? and sited the nearly 5,000 percent increase in the per-pill cost of a drug to treat parasitic infections.

She also wants to use the ???leverage??? of the 50 million Americans now on Medicare ??? the government insurance program for the elderly ??? to force drug companies to bring down prices.

But the program simply has worked too well as is. Three times the Centers for Medicare and Medicaid have lowered the 10-year cost estimates for Part D. Why? Because, thanks to the part of the law Clinton wants to destroy, the savings have far outstripped expectations.

When the law was being debated in Congress, Reps. Henry Waxman, D-Calif., and John Dingell, D-Mich., both now retired, wanted to place a cap on Part D premiums of $41 per month because, they said, absent government controls, premium costs would spiral out of hand.

The proposal was rejected. Part D premiums opened at about $21 per month and even today are barely $30. Imagine if we had listened to them advocating essentially what Hillary proposes here.

Instead, we wisely chose to truly let market forces work. Even President Obama, who promised in his 2008 campaign to rescind the rule and let government negotiate, abandoned the plan.

Instead of a lethargic, unresponsive bureaucracy, we have a market where service and price count for something. This has made the program more popular ??? planners counted on perhaps 15 million people using the program; 24 million were signed up in the first two years.

It also has made it a more diverse, vibrant market — even Alaska has more than 40 plans to choose from, and customers can purchase everything from a bare bones plan to those that cover the ???doughnut hole??? in Part D payouts.

The customers love it. Satisfaction rates started in the high-80s and have eclipsed 90 percent at times in the program???s history.

And they don???t want Hillary-style interventions. A poll out this week found more than half of Americans don???t want government setting the price of drugs and most support continuing to allow plans to negotiate directly with drug companies and without government intervention.

Three in five say such a move would limit access to drugs and two-thirds thought it would mean fewer new drugs are developed. Opposition to government controls increases significantly when voters learn drug companies regularly provide medicines for free to some of those who use them but can???t pay.

A quick review of the economics of drug companies explains why. It takes $820 million to bring a drug to market today, and most of the drugs the companies attempt to develop fail. Moreover, the big advance of most medicines approved today is they are more specific, which means they are useful to fewer people.

Drug prices are set to recover costs, make a profit and provide capital to develop new drugs.

So yes, new drugs have huge development costs and few customers, and yes, some are quite expensive. Presumably, the drug development costs of these new, narrowly tailored cures will come down as we become more experienced at developing them.

But what won???t change are the laws of economics. If government tries to cap a price, the costs will be borne elsewhere. The costs of other drugs that serve significantly more people will increase, and the amount spent to develop the next great cure will decrease.

Tom DeLay was right. Part D was good politics. It was good policy too, and Hillary needs to leave it that way.