Prescription price controls mean fewer jobs, not lower inflation
The Biden administration continues to push a trillion-dollar tax and spending plan. After spending the second half of 2021 viewing rising inflation as “transitory,” the administration now says spending more money and raising taxes will help bring inflation down.
One of the ways they say it will do this is by implementing socialist price controls on the healthcare system that will (initially) reduce the cost of prescription drugs.
Even Biden advisers know better.
Price controls never worked. Although they can reduce the cost of products initially, they quickly lead to shortages and ultimately harm consumers. For example, when price controls were imposed on gasoline in the 1970s, they led to long lines and shortages at gas stations.
Americans are being hit hard by inflation, but prescription drugs are one of the few items whose prices held steady during the Biden years.
According to the Bureau of Labor Statistics, the price of prescription drugs has increased by only 1.9% over the past year. In contrast, the consumer price index for all items rose 8.6%. And who in the Biden administration makes sense to impose price controls on the product whose price is rising by 1.9%?
Gasoline prices rose 48%, bacon 15% and eggs 32%. Used cars and trucks increased by 16%, airline tickets by 38% and milk by 16%.
Rather than helping to reduce costs, price controls will hurt the economy and threaten well-paying manufacturing jobs.
The proposal would give federal bureaucrats the power to set drug prices. If a manufacturer fails to meet this government-set price, they are hit with a 95% excise tax on the drug’s revenue.
This would create a vast new fiscal and regulatory structure that could be applied across the entire healthcare system and ultimately lead to socialized healthcare.
Foreign countries frequently use price controls on their healthcare system to the detriment of patients and the development of new treatments.
For example, Canadian patients wait an average of 19.8 weeks from referral to treatment. In comparison, 77% of Americans are treated within four weeks of referral, while only 6% wait more than two months.
In the UK, there was a shortage of 10,000 doctors and 43,000 nurses in 2019, with 9 in 10 National Health Service officials saying too few doctors and nurses posed a danger to patients.
The United States is currently a world leader in medical innovation. According to a study by the Galen Institute, 290 new medical substances were launched worldwide between 2011 and 2018. The United States had access to 90% of these treatments, a rate far higher than that of comparable foreign countries. By comparison, the UK had access to 60% of the drugs, Japan 50% and Canada only 44%.
Price controls would lead to fewer new drugs. In fact, a study by the Council of Economic Advisors estimated that price controls could lead to the reduction of 100 lifesaving drugs over the next decade and could reduce the life expectancy of the average American by four months.
The need for strong medical innovation should be clear to all in the wake of the coronavirus pandemic. American manufacturers have managed to develop vaccines and treatments for COVID-19 at some of the fastest rates ever. Price controls would disrupt this medical innovation and threaten our ability to fight future pandemics.
In addition to harming the healthcare system, price controls would threaten the economy and quality manufacturing jobs.
Medical innovation, directly and indirectly, supports more than 4 million jobs in the United States and all states, according to research by TEconomy Partners, LLC. These are quality jobs that pay well – the average annual salary for a pharmaceutical worker in 2017 was $126,587, more than double the average private sector salary of $60,000.
The left does not support drug price controls because it wants to reduce costs, but because it wants to transform the health care system into a socialist “Medicare for All” system. They would ration health care like Canada and Britain do. The sick are waiting.
This is the new version of fuel lines. Politicians control the prices of new drugs. Fewer drugs are invented. You queue to get there. At least the Americans stuck in Jimmy Carter’s gas lines weren’t sick. Biden’s rationing will hurt more.
Grover Norquist is the president of Americans for Tax Reform.