Hillary Clinton's Plan to Control Drug Prices Is Symptomatic of a Failed National Health Care Policy

The vast reach of government as a payer for health care means that drug companies are to a large degree government contractors, and patients are suffering.



Hillary Clinton isn't even president of the United States yet, and she's already managed to destroy billions of dollars worth of shareholder value. Don't take it from me; take it from The New York Times, which reported in a recent news article that "The Nasdaq biotechnology index lost 6 percent of its value, continuing a rout that was in part set off by a tweet from Hillary Rodham Clinton on Sept. 21. Commenting on a New York Times article about Turing Pharmaceuticals, a company that raised the price of a drug by many times, Ms. Clinton tweeted: 'Price-gouging like this in the specialty drug market is outrageous.' The next day she announced a plan that would aim to limit drug prices in some cases."

Sound familiar? A Democratic presidential candidate preparing to shake down drug companies is a pattern that dates back at least to Barack Obama. An Associated Press article described the deal that the pharmaceutical industry wound up striking with Obama as follows: "the companies volunteered $80 billion in 10-year savings for the health care changes, and backed it up with an expensive TV ad campaign pushing Obama's proposal."

"Volunteer" is an interesting word to describe what the drug companies did back in 2009 and 2010, given the threat they were faced with.  As the same AP article put it, "Lobbyists beat back proposals to allow importation of low-cost medicines and to have Medicare negotiate drug prices with companies. They also defeated efforts to require more industry rebates for the 9 million beneficiaries of both Medicare and Medicaid, and to bar brand-name drugmakers' payments to generic companies to delay the marketing of competitor products."

Having gotten the drug companies to "volunteer" $80 billion on the last go around, the Democrats are going back for more. If the drug companies play the game again this time around, you can bet that in four or eight years, the Democrats will be back for another $100 billion. It's like any other protection racket. Once you pay the first time, the mobsters will be back for more.

This time around, the drug-industry trade group is showing signs, at least, of resistance. The president and CEO of Pharmaceutical Research and Manufacturers of America, John Castellani, issued a statement saying, "Secretary Clinton's proposal would turn back the clock on medical innovation and halt progress against the diseases that patients fear most. These sweeping and far-reaching proposals would restrict patients' access to medicines, result in fewer new treatments for patients, cost countless jobs across the country and erode our nation's standing as the world leader in biomedical innovation."

No one wants to discourage medical innovation. Experience in many areas has shown that sellers are far better at setting prices than government bureaucrats are. At the same time, the vast reach of government as a payer for health care—for government employees, military veterans, and via Medicare for the elderly and Medicaid for the poor—means that the drug companies are to a large degree government contractors. One can't expect taxpayers to bear unlimited prices over unlimited periods of time without some resistance.

The Cato Institute's Walter Olson points out that two laws intended to help patients, the Drug Price Competition and Patent Term Restoration Act of 1984 and the Orphan Drug Act of 1983, have backfired, and that the regulatory red tape of FDA approval makes it costly for new entrants to compete in the medicine business.

So how will this work itself out? The left will keep talking about greedy drug companies. The right will keep talking about excessive regulation. Clinton may try to control the price of medicine, but even she hasn't yet come up with a way to control the prices of drug-company stocks. Those prices have a way of conveying information. If Clinton pushes too hard, she may find the drug industry not "volunteering" to run commercials helping her, but instead enlisting in a campaign to explain to Congress and the public why she is wrong.

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  1. Well, I see there isn’t a word regarding the regs which Turing is gaming allowing it to raise the prices. If Shrill were serious about pharm costs, she could start there.
    Of course, the issue here is angling for votes; regardless of possible solutions.

    1. Turing took the drug into closed distribution, making it impossible to prove ‘substantial equivalence.’ The solutions I see in this case are to either force the manufacturer to sell its drug to the company that wants to sell a generic, or to do away with ‘substantial equivalence’ testing or alter it such that it doesn’t require the company to purchase the existing drug. The former isn’t very libertarian, though maybe understandable since the market is already far from free, and the latter seems impractical.

      Either way, trying to address the root problem is still better than some half-baked price caps.

      1. What does the FDA do if the original drug comes off the market entirely? It seems to me that they should probably have a testing reserve of any drugs they approve, specifically to deal with generics approval.

        1. That would be interesting to see: a company trying to revive a discontinued product which had marketing approval or had been grandfathered. However, that’d probably occur only with a new indication for the drug, which would require a full new drug appl’n anyway.

          When it comes to old drugs that everybody knows works, FDA has successfully argued in court for a narrow construal of “generally recognized as safe & effective” in cases where it wasn’t a FDA advisory panel doing the recognizing. However, it’s been a case of who blinks 1st when there’s no good substitute for the drug, as was the case w thyroid hormone, and FDA has just extended grace periods on enforcement indefinitely. So they’re saying it’s illegal to market your product, but we’re not going to do anything about it, for now. Kind of like with marijuana, which theoretically is in the same position when it comes to medical use.

  2. Commenting on a New York Times article about Turing Pharmaceuticals, a company that raised the price of a drug by many times, Ms. Clinton tweeted: ‘Price-gouging like this in the specialty drug market is outrageous.’ The next day she announced a plan that would aim to limit drug prices in some cases.”

    The drug itself is cheap and the patent ran out decades ago. In a free market, people could simply import it from Canada or Europe for a few cents per pill.

    The “price gouging” is effectively the result of crony capitalism, protectionism, and government-granted monopolies. But instead of fixing that problem, Ms. Clinton feigns outrage and wants to perpetuate those monopolies, just with a bit more government regulation.

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  4. This article’s pretty cool unless you’ve got AIDS and some twerp jacked up the price of your lifesaving medication 700% overnight because freedom.

    1. 1. That wasn’t for AIDS so not sure what you are talking about

      2. Scarcity was created by the FDA for that drug not allowing generics or imports

      3. Why do you feel entitled to force people to provide you these drugs at prices you want? Perhaps you should be grateful that they exist….why wouldn’t you want to pay those prices to save your life?

      1. 3- Probably because you can’t reasonably live anyway if you can’t afford the pills. This isn’t some new drug that you can’t get. It’s a very old drug that had the price raised for no reason other than pure greed. They then limited distribution so no company COULD compete with them (can’t get the drug in order to study it and make another generic.)

    2. Apt username. Obviously the market is f***ed up. Something needs to be done. Either you do Euro-like price caps or reduce regulation. Just something. No reason for people paying $7 a pill (because it was obviously only worth that til some d-bags raised the price for no reason) to have their lives put at risk so some scumbag can get rich.

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