Price controls

President Trump: Pharmaceutical Price Controls Are a Bad Idea

Americans would save some money now, but at the long-run cost of sicker and shorter lives



At his first post-election press conference, Donald Trump declared that pharmaceutical companies are "getting away with murder" by pricing their drugs too high. "Pharma has a lot of lobbies, a lot of lobbyists, and a lot of power. And there's very little bidding on drugs," Trump said in January. "We're the largest buyer of drugs in the world, and yet we don't bid properly." At a meeting with pharmaceutical company executives later in January, Trump stated, "The U.S. drug companies have produced extraordinary results for our country, but the pricing has been astronomical for our country." He added, "For Medicare, for Medicaid, we have to get the prices way down."

Trump was characteristically vague about just how he would lower pharmaceutical prices, but let's assume that Medicare was legally mandated to negotiate prices with drug companies. In this case, "negotiate" amounts to creating price controls since pharmaceutical manufacturers would largely have to take whatever price the government wanted to offer, much like what already occurs in the case of the Veterans Affairs Department. Most companies would likely agree to the government price controls because they would still make money from their existing drugs because marginal costs of each additional pill are so low. What would happen? A new study in Forum for Health Economics & Policy by a team of researchers led by Jeffrey Sullivan at the consultancy Precision Health Economics finds that price controls would indeed reduce the cost of drugs to Medicare Part D participants.* But the unintended consequences to Americans' lives and health in the future would be substantial and bad.

The researchers sought to analyze what would happen if Veterans Affairs drug pricing and formulary policies were applied to Medicare Part D—the federal program that subsidizes the costs of prescription drugs for senior citizens. More than 41 million Americans are enrolled in it, and estimated benefits will total $94 billion, representing 15.6 percent of net Medicare outlays in 2017.

Without going into great detail, the Veterans Affairs Department sets the federal ceiling price it will pay for drugs at 24 percent below the average price a pharmaceutical company gets from wholesalers. In addition, the VA keeps overall spending down by restricting the drugs to which veterans have access. For example, the Avalere consultancy reported in 2015 that the VA's formulary does not offer access to nearly a fifth of the top 200 most commonly prescribed Medicare Part D drugs. So what would happen if Medicare adopted VA-style price controls?

Cutting prices would save Medicare money. The researchers cite a 2013 study by Dean Baker, co-director of the Center for Economic and Policy Research, that calculated that drug price controls could save Medicare between $24.8 and $58.3 billion annually. On the other hand, less revenue to pharmaceutical companies means less money devoted to research and development. A separate study, published in Managerial and Decision Economics in 2007, estimated that cutting prices by 40 to 50 percent in the U.S. will lead to between 30 and 60 percent fewer R&D projects being undertaken. Reduced investments in pharmaceutical R&D consequently results in reduced numbers of new drugs becoming available to patients. A 2009 study in Health Affairs calculated that as a result of fewer innovative pharmaceuticals being developed, average American life expectancy in 2060 would be around 2 years lower than it would otherwise have been.

Aiming to calculate the effect of drug price controls on future Medicare savings, Sullivan and his colleagues input these data and estimates into an econometric model that aims to track cohorts of people over the age of 50 and to project their health and economic outcomes. They estimate how both VA-style price controls and formulary restrictions would reduce Medicare drug expenditures, along with their effects on future drug development by pharmaceutical companies between 2010 and 2060. Keep in mind that what is being calculated here is the additional reduction in drug company revenues that the imposition of price controls would cause. Competition and its effects on future drug company revenues is assumed and taken into account in the econometric model being used by the researchers.

They devise a low-impact scenario in which price controls lower pharmaceutical company revenues by 7 percent and patient access to drugs by 7 percent, and a high-impact scenario in which revenues are reduced by 15 percent and access by 14 percent. In order to see how price controls will affect future lifetime spending and life expectancy, they assess cohorts of Americans born between 1971 and 1975, between 1981 and 1985, and between 1991 and 1995.

They learned that Medicare price controls do indeed reduce spending on drugs. In the low-impact scenario, the oldest and youngest cohorts respectively spend $100 billion and $300 billion less than they otherwise would have done. In the high-impact scenario, the lifetime expenditures for oldest cohort are reduced by $300 billion; for the youngest, it's $500 billion. Meanwhile, as a result of reduced revenues, pharmaceutical companies develop and introduce fewer innovative drugs. The researchers calculate that 11 percent fewer drugs would be available in 2060 in the low-impact scenario; in the high-impact scenario, the decline is 25 percent.

Slowed drug development means shorter and sicker lives. The researchers estimate that the oldest cohort will lose between 0.4 and 1.2 years of life expectancy, depending on the scenario; the lives of the youngest will be cut short by 0.9 to 2 years. The "good" news is that shorter life expectancies mean that Medicare and its recipients will spend less money on other forms of medical care. In other words, dying younger saves money. Consequently, Medicare would spend $700 billion to $1.5 trillion less on both drugs and medical care than under the status quo.

People tend to value longer and healthier lives. To calculate the costs of lower life expectancies, Sullivan and his colleagues adopt a middle-of-the road estimate of $200,000 for each statistical life-year. (Roughly speaking, that is the amount of money people would be willing to pay for an extra year of life.) Once the calculations are cranked through their model, the researchers report, "price controls would reduce lifetime welfare by $5.7 to $13.3 trillion (US$2015) for the U.S. population born in 1949–2005." In other words, the "benefits" of imposing drug price controls are almost nine times lower than their overall costs to the health of Medicare recipients.

These results, like all econometric model results, are illustrative only. Nevertheless, they are plausible. "Economists may not know much, but they do know how to produce a shortage or surplus," explains the Rutgers economist Hugh Rockoff. "Price ceilings, which prevent prices from exceeding a certain maximum, cause shortages." If President Trump and Congress seek to get Medicare "prices way down" by imposing price controls, Americans will save some money now, but at the long-run cost of living sicker and shorter lives.

*Given that this research was supported by the Pharmaceutical Research and Manufacturers of America, readers may want to ingest an additional helping of sodium chloride when evaluating its results.

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  1. On the other hand, less revenue to pharmaceutical companies means less money devoted to research and development.

    And heaven knows there isn’t a bit of fat to be cut there.

    1. Their marketing budgets are the same or larger than their r&d budgets. I’d rather ban advertising first. It would have the knock on benefit of seriously fucking broadcasters.

      1. Advertising is an investment in the sense that a dollar of advertising gives them a dollar or more of profit or they wouldn’t do it. For proggies following along that means less money for R&D and more sick people die.

        Why do you hate sick people?

      2. To be clear, their R&D budget is mostly comprised of D. R is largely performed in the public sector.

    2. Conservative Republicans and faux libertarians support “statistics” and “studies” only when they align with their ideology.

      1. It would be so cool to be like progressives who don’t do this.

        1. Yeah, “rudehost,” that would “cool” if contards such as yourself were much more intellectually consistent when evaluating a situation. LMAO

          1. I’m not aware where I have been intellectually inconsistent but then again the snowflake crowd has never been big on facts or reason which makes me wonder how you managed to spell the url to get here. Were you looking for and stumbled in here instead?

            1. “Rudehost” (hey, that’d be such an apropos name for the vulgarians at Faux News), you can claim whatever you wish about your intellectually consistency, but I can certainly claim mine with legitimacy. Little, cowardly, wimpy snowflakes such as you are frightened of the truth and can’t properly deal with it. And, to answer your question, yes, in a way, I was searching for “” because this is where retarded contards like you come to to get off, so to speak.

  2. I have a question….

    I have seen folks talk about medicare part d and the huge entitlement it created and was bad. I think it might have to do with not negotiating medicare drug prices? But this piece talks about negotiations for prices

    Can someone clarify if i am missing something why this is bad considering the angst boosh caused with part

    I don’t actually know just trying to make sure i am not confusing or conflating things

    1. Medicare and Medicaid do negotiate drug prices. The negotiations go like this:

      Medicare/Medicaid: “We will reimburse you for your drugs at 1/3 of your cost. You will accept this or be shut down by the state.”

      Pharmacy: “How are we supposed to stay in business if we’re losing money on so many transactions?”

      Medicare/Medicaid: “That’s not our concern.”

      Pharmacy: [goes out of business and/or gets purchased by CVS]

      1. You do realize that the cost of actually making the drugs is negligible. I’m not really sure what you mean by “1/3 of your cost” but it’s not like it’s obvious or set in stone. And, it’s not the pharmacy that has to worry about the cost of reimbursement, it’s the pharma companies.

    2. as: The federal government cannot negotiate drug prices for Medicare Part D. Instead Part D participants enroll in private prescription drug plans (about 800 or so are available around the country) which are supposed to compete and negotiate with the drug companies and thus lower costs.

    3. The partD legislation specifically included the three provisions that the pharma lobbying group (PhRMA) insisted on:
      1. No direct administration of benefits by Medicare
      2. No explicit cost control
      3. No legalization of drug reimportation

      Crony heaven ($500 billion+ in extra expected spending over the next decade (2004-2014) — which is now roughly $1 trillion in extra spending over the now next decade (2014-2024). But hey. That’s what establishment libertarianism is all about. Keeping govt small by making it bigger and eliminating cronyism by ignoring it.

      1. Except for the niggling little problem that Libertarians didn’t support that new welfare program. Tell you what how about we make all of us happy and just eliminate it and the cronyism will be gone. Sound good?

        1. But this article is not calling to eliminate or reform the not-at-all-new-anymore program. It is JUSTIFYING the program – unreformed – and specifically the crony elements. What’s good for big pharma is good for America. Any libertarian who does now try to step out into difficult waters to try to address Medicare reform has now been kicked in the teeth by – the usual establishment libertarians who want to make their usual implicit defense of plutocratic rent-seeking.

          It really doesn’t matter one whit whether Reason opposed the legislation 10 years ago. So did Dems.

          1. Hell I can think of one reform right now.

            1. Have Medicare reduce the drug prices Medicare will pay by 40% – savings $40 billion
            2. Spend $10 billion of that funding research on stuff that will likely increase life expectancy among younger cohorts. It won’t be pharma research because that window closed long ago – most people die now of simple senescence – the combination of all sorts of stuff that is called aging and where curing one of them doesn’t do shit.

            But goddamn I have now committed two libertarian heresies. All that’s left is to rant on about rationalist praxeology or maybe Somalia.

            1. The only acceptable reform is to eliminate the program. No rent seeking and no handouts. Setting functional price controls and offsetting that by giving the money to whichever researcher is the most politically connected is hardly a reform.

              1. And that ‘acceptable reform’ is now both a)politically extremely difficult at best as it always is and b)undermined by articles like this.

                The reality is that libertarians have to sell the PROCESS of free markets as well as the outcomes of them if they are to ever succeed at anything. ‘Taking something away that that someone already has’ is coercion to virtually everyone. You can’t coerce people into a free market and they ain’t gonna be convinced that it isn’t coercion by some highfalutin rationalist praxeology and NAP principle. Medicare isn’t going to go away in one fell swoop – tomorrow. Period. If that’s the only acceptable, then you are useless to the longer-term ability to actually eliminate Medicare.

                And this article – yeesh. If a 40% cut in drug prices paid for by Medicare is viewed as Soviet-style price control that causes harm by Reason – then how much harm is a 100% cut? How much will they then kick advocates of that in the teeth?

  3. Let’s make NATO countries pay their fair share.

    1. US taxpayers have paid for the US government’s protection racket since 1913.

      It’s high time for other NATO taxpayers to pay their share.

    2. Given that many of them have price controls and basically free ride on US funded r&d, that’s a more relevant suggestion than you think.

      1. Welfare State to the world. Policeman to the World. Drug Researcher to the World.

        The US taxpayer (and protected market consumer) fund the rest of the world.

        Time for some American Peasants First!

  4. RE: Trump and Medicare Drug Price Controls: New at Reason
    The unintended consequences to Americans’ lives and health would be substantial and bad

    Trump acting like a democrat?
    Oh wait…what’s the difference between republicans and democrats again?

  5. “Trump was characteristically vague about just how he would lower pharmaceutical prices, but let’s assume ”

    Yeh. So you’re just spitballing, eh?

    Since we have no idea what Trump has in mind, why create a negative prediction out of thin air? There are some positive reforms that could help.

    For instance. Change patent law for pharmaceuticals. Allow companies to adjust IP protection relative to profit tiers. A short patent with no profit limit….or a longer patent with profit caps. Free market baby.

    Provide direct government grants for R&D, paired with profit caps. Huge issue with pharma R&D is the cost versus risk profile. Government grants would allow lower risk R&D in areas not deemed suitable.

    Establish a DARPA-like federal R&D program for critical pharma efforts. Fed owns patents, farms out manufacturing to industry bidders.

    since we’re just spitballing of course.

    1. Why on earth do you want to involve the gov’t MORE thru the use of grants?

  6. What is this crap doing in reason?

    1. Yes, why on earth would the prospect of yet more government intervention in what ought to be a marketplace be of concern to libertarians?

    2. S: Just trying to forestall as best I can the Trump administration going down this path. You know, libertarians have this aversion toward possible government intervention in markets.

      1. R: Would be nice if certain libertarians would remain consistent in this message in regards to say, Carbon trading schemes.

        1. T: And your solutions to open-access commons problems is ….? But let’s stay on topic here and you can argue with me when I next write about climate change policy.

      2. But apparently pharmaceutical cronyism is perfectly fine to libertarians because it supports ‘drug research’ and other good things

    3. All: Just for the record Reason was against Bush enacting Part D. From 2005: President Bush seems intent on following the LBJ model by making entitlement spending even more overgrown. In a fiscally reckless act, Congress and President Bush enacted the $550 billion (over 10 years) drug bill even though the budget is deep into deficit and Medicare already has a huge financing shortfall. Not only is the new drug program the biggest expansion in Medicare since its inception, it’s virtually certain that the $550 billion price tag is a low-ball estimate.

      1. ron why is it an entitlement based on above what you said. I am a bit lost on that

        You talked about private negotiation

        1. The benefit is still paid by the government and it applies to anyone medicare eligible, i.e. over 65, so an entitlement.

  7. drug price controls could save Medicare between $24.8 and $58.3 billion annually

    From the linked article: The reason that other countries spend so much less on prescription drugs is that their governments negotiate prices with the pharmaceutical industry.

    Or, or, or here’s an alternative theory – foreign countries pay lower prices than Americans do because they’re buying at marginal rates. High prices in the US underwrite the foreign sales when it may cost $10 billion for that first pill but only eight cents for every pill thereafter. The US is a big, rich market that pays for the R&D, we pay more for drugs because of foreigners paying less, not despite them paying less.

    It’s like waiting until the last minute to buy a plane ticket from a ticket broker – the plane’s flying whether you’re on it or not and the marginal cost of adding a passenger to the flight is near zero for the airline so if they can put a butt in an empty seat for 20 bucks, they’ll do it. But it’s not like the airline can sell everybody a ticket for 20 bucks, they’d go broke that way. It’s only because half the passengers have paid full fare and already covered the airline’s cost of the flight that it’s possible for them to sell the rest of the seats at whatever price they can get and still make a profit.

    If the US wants to get in on the marginal price racket, who’s paying the full R&D price?

    1. Can’t the drug companies just jack up prices to foreigners? Here’s a secret – foreigners aren’t just dirty and smelly and jibber-jabber in some sort of foreigner monkey language, they’re also poor. No, you can’t just jack up their prices, they’ll stop buying the drugs because they can’t afford them.

    2. J: You ask: If the US wants to get in on the marginal price racket, who’s paying the full R&D price? Answer: Nobody.

      As I reported in my 2001 article, “Goddamn the Pusherman“- Essentially, companies are selling their products abroad at prices well below their long-run development costs, but above their current manufacturing costs. While the drug companies can make some money this way, it’s not enough to generate the profits necessary to fund their enormous R&D costs. Indeed, it is because of our relatively unregulated market that the U.S. provides the rest of the world with new drugs. Over the past two decades, companies in the U.S. have produced nearly 50 percent of the world’s leading pharmaceuticals. Today, U.S. drug companies make all 10 of the world’s best-selling drugs. Due to other countries’ price controls, pharmaceutical research and development has increasingly been centered in the United States.

      1. So one reform that trump could do is say that medicare won’t pay more than the oecd average cost for a drug. So either they charge the parasitic eurotards and canucks more or us less. I realize the are suboptimal responses to such a plan but it would help put pressure where it is needed.

      2. Indeed, it is because of our relatively unregulated market that the U.S. provides the rest of the world with new drugs.

        Unregulated market! Bwahahahaha!

        A protected market with government granted monopoly where I have to pay for a permission slip from a government enabled rent seeker to even buy in that market.

        1. Oh Hell, your permission slip for purchase is nothing compared to the cost of obtaining permission to even sell the product.

          FDA approval is not so much a “gold standard” as an absolute barrier to entry.

          There is no free market and there still wouldn’t be even if every product were OTC.

    3. If the US wants to get in on the marginal price racket, who’s paying the full R&D price?

      The full R&D price for exactly what drugs? The current major pipeline in pharma (ie what they have been spending the extra money already paid to them in the last decade by taxpayers via Medicare) is:
      1. Alzheimers (avg onset over age 70)
      2. Parkinsons (avg onset over age 60)
      3. Cardiovascular (avg onset over age 55)
      4. Oncology (and the focus is on middleage or later onset cancers)
      5. Biosimilars (basically biologic copies of previous patented drugs so that generics cannot compete as well)
      6. Inflammatory diseases (wide variation in average onset from teens to elderly)

      IOW – pharmas are mostly using the Medicare market to produce more drugs for the Medicare market and to game the patent system. If they actually do increase life expectancy, then that life expectancy is almost entirely non-economic (both income and med expenses for those patients are paid by taxpayer and future generations). If they don’t increase life expectancy that’s ok too since they cost a lot and have a nice big guaranteed market now.

      There is a serious problem here. By NOT going to marginal pricing for that market all we are doing is incentivizing elderly entitlements. And the response by pharma is completely rational. The elderly were already a significant market for pharmaceuticals before partD subsidies – but often generic. Now they are a huge part of that market – and they are the focus of most R&D.

      1. Total pharma market share in 2004 (pre partD) and now:

        Medicare – 2% then and 30% now – total is $100+ billion per year now
        Medicaid – 18% then and 9% now
        Out-of-pocket – 25% then and 14% now (this is where elderly used to be)
        Private insurance – 55% then and 45% now

        Medicare is now driving pharma growth

  8. If you can buy the same drugs in Canada for about 1/10th the cost of here in the US that should be enough reason to execute the thieving executives of the pharmaceutical companies and the politicians that allow them to get away with it. That little jerk that bought a orphan AIDS drug and raised the price 5000% should of been hung from the closest tree

    1. Canada has cheap drugs because we negotiate better prices. In a free market, people could just import drugs from different companies: Ebay for drugs. But government intervention, in the form of drug patents and the FDA, jacks up the price. I think you are mad at the wrong people.

      1. Canada has cheap drugs because you have price controls and have the US fund research for you.

      2. But government intervention, in the form of drug patents and the FDA, jacks up the price. I think you are mad at the wrong people.

        Exactly. I don’t blame Canadians, I blame our own Ruling Reptiles who shake us down for rent seeking profits.

  9. The asterisk plus dry humor is almost as good as a disclaimer.

    It would be even better if you bought some Big Pharma stock. Think of all the autistic screeching that little act could inspire.

  10. Yeah, I see your point Bailey and I’m not really quibbling with your argument, but I’m still going to criticize, cause that’s what I do.

    If Medicare negotiates drug prices that saves taxpayers money and I want more money. By not negotiating drug prices, the pharmaceutical companies are rent-seeking off of government mismanagement. Ideally, the solution should be to abolish Medicare, but if we are going to have Medicare, why not insist that the government run it in the most financially efficient way possible and damn the unintended consequences?

    1. W: Because the unintended consequences are costs that are 9X higher than the benefits, plus sicker and shorter lives. Just saying.

      1. I question both the methodology/numbers.

        The assumption is that people value an extra year of life – ie what they are willing to pay – at $200,000. Well that ain’t a constant. An extra year of life expectancy at age 95 almost definitely doesn’t have that value. Because at that age – that extra year is almost 100% being paid by someone else anyway. It’s not like they are gonna use that year to start a small business. I don’t mean to be cruel here I really don’t. Just saying.

        And the reality is that ‘extra year of life expectancy’ is almost a meaningless measure in the industrialized world – since the average life expectancy is way beyond retirement now. A better measure would be ‘reduction of premature deaths’ – where that avoided death produces a lot of years of life. In the third world where they are still dealing with diarrhea and HIV/AIDS and malaria and childhood diseases, ‘life expectancy’ is still a good measure. Not in the West.

  11. Ron do you know if foreign countries let us develop drugs and they basically copy the work?

    Sort of like dodson was trying to do in jurassic park

    1. I’m in the industry, and I do know that you cannot “basically copy the work” done in foreign countries. We have a new product due to hit this the market this year. But it’s going to be ten years before it hits the US market because we need to do an entirely new round of testing. Doesn’t matter if the EU approves the treatment, the FDA has to independently approve it with tests performed specifically for the FDA.

      1. No i mean foreign countries steal your drug

  12. We could drop the price of pharmaceuticals and medical devices precipitously if we would provide a parallel path to market using competing for profit certification agencies rather than forcing everyone to go through the FDA, which is a monopoly which can’t scale up productivity.

    Add to that indemnification of reviewers on review sites for the certification agencies, the drugs, and the manufacturers, and we’ll have a robust and safe market that is constantly driving costs to commodity levels and pushing innovation as a differentiator.

    Right now most of our innovation dollars are going towards political ends.

  13. Just got charged $22 for 90 days works of medications that according to Google have a market price in the neighborhood of $240. And they waved the price because I was on the network. Thus the benefits of actually having a prescription plan with your healthcare.

    Of course, I’m an evil white male with the rare privilege of having a job. And of course I really did pay through the nose for my meds through that pound of flesh the gub’ment extracts every paycheck. But still, I’m not seeing the need for pharmaceutical price controls. Some assholes do jack up their prices when the FDA hands them a monopoly, but that’s not need to go full Nixonian. How about we stop handing out those monopolies instead?

    1. Just got charged $22 for 90 days works of medications that according to Google have a market price in the neighborhood of $240.

      Price differential like these shows there is no “market” involved. Government enabled rent seeking in all directions.

  14. Drugs are one of the best ways to avoid even more expensive procedures and hospital stays. Part D has its problems but on the cost front but it’s actually come in
    under projected costs
    which is probably a first for any entitlement.

  15. In this case, “negotiate” amounts to creating price controls since pharmaceutical manufacturers would largely have to take whatever price the government wanted to offer

    Much like consumers have to take whatever price pharmaceutical manufacturers set with their government created monopolies and protected markets.

    When the government tries to restrain the corporate rent seeking shake downs that government created in the first place, Reason cries Anti Free Market Heresy!

    1. Benjamin Tucker’s critique of Herbert Spencer in 1884 applies to Reason’s commitment to “free” markets in medicine:

      It will be noticed that in these later articles, amid his multitudinous illustrations (of which he is as prodigal as ever) of the evils of legislation, he in every instance cites some law passed, ostensibly at least, to protect labor, alleviate suffering, or promote the people’s welfare. He demonstrates beyond dispute the lamentable failure in this direction. But never once does he call attention to the far more deadly and deep-seated evils growing out of the innumerable laws creating privilege and sustaining monopoly.You must not protect the weak against the strong, he seems to say, but freely supply all the weapons needed by the strong to oppress the weak. He is greatly shocked that the rich should be directly taxed to support the poor, but that the poor should be indirectly taxed and bled to make the rich richer does not outrage his delicate sensibilities in the least. Poverty is increased by the poor laws, says Mr. Spencer. Granted; but what about the rich laws that caused and still cause the poverty to which the poor laws add? That is by far the more important question; yet Mr. Spencer tries to blink it out of sight.

  16. We’re talking health here … shouldn’t that be extra potassium chloride instead of sodium chloride … washed down with plenty of dihydrogen monoxide?

  17. The thing is, Americans pay so much for drugs is because other countries don’t.

    In some cases, it’s because they are poor, like India, and often threaten to just manufacture them themselves, patents be damned.

    But in the case of Europe and Canada and other 1st world countries, just because they don’t want to. Why should we have to support the R&D of all the drugs in the world?

    And of course not every one in the US plays the same amount for drugs. People without insurance pay the most and if they don’t have the cash for the drugs, well, they can do die.

    Price controls aren’t a very good answer, but the problem doesn’t have many other solutions. Legalize all drugs and let anyone make them would be my choice, that would keep affordable. But that ain’t gonna happen. The government will decide who can make and who can sell the drugs. Why should that restriction be used to price drugs out of the price range of many?

  18. “In this case, “negotiate” amounts to creating price controls since pharmaceutical manufacturers would largely have to take whatever price the government wanted to offer, much like what already occurs in the case of the Veterans Affairs Department.”

    uh no. Or does every time the government negotiates for one of the myriad products or services it buys constitute creating price controls?

    Come on Ron – I expect better from you.

  19. Contrary to what is commonly believed, drug companies are like any other business. That is, they are in business to make a profit. And making a profit without risking a lot of money on research that might never pan out isn’t something they want to do because that would make the stockholders unhappy. Drug company research is a “cost”, one that is going to come out of the profits made through the sale of medical drugs. A drug company’s management (and investors) is mainly concerned about return on investment. So they produce drugs that didn’t strain the budget too much instead of drugs that took a dozen years of research and may never pass FDA testing. For example, asthma inhalers used freon as the propellent for decades. The patents for these had expired years before so they were mainly being produced by generic producers, likely located in India, one of the major producers of generic drugs.
    However when the federal government outlawed the use of freon as a propellent, the drug companies saw the opportunity to create inhalers using some other type of propellent. This also allowed them to obtain a new patent for the inhalers which meant the inhalers were now once again “brand names” to be sold at a much higher price. For the companies this was an extremely profitable action since the investment was relatively small and the price could be put back up where a good profit could be made. Remember the drug companies, are here because they can make bigger profits than elsewhere.

    1. Actually the whole patent/research process that we have in the US is not the only option and not the best option. We adopted ours from the British model of chemical patents – patents given for the synthesized chemical itself and thus implicit protection for EVERY process that could create that chemical. The German model – you can patent a particular process but NOT any particular synthesized chemical. It is no accident that the German model was FAR more successful and innovative and competitive – and actually more in line with our own constitutional justification for patents (to promote the progress of science and the useful arts). The British model tends to stifle utility – and over time stifles even innovation and the aha moments. In practice, we adopted the British model when we passed the Trading with the Enemies Act during WW1 (all German process patents were confiscated by the US govt – and then ‘licensed’ to select companies to create the modern US pharma industry). We forced the Germans to adopt our model in the 1970’s.

      Our model creates artificial value for isolated ‘research’ but turns manufacturing into a mere cost center. The German model makes manufacturing the value center – and ‘research’ is the internal leverage that a company uses to make its manufacturing more valuable and sustainable.

  20. Yes, we know. Price controls are bad. Yet the reality is that virtually the entirety of the remainder of the developed world impose price controls on drugs, leaving US consumers to bear the vast majority of the burden of underwriting R&D. It’s one thing for developed countries to underwrite costs allowing undeveloped countries to free ride. It’s another to allow all developed countries to constantly free ride on US consumers.

    I propose that we simply pass a law mandating that pharmaceuticals may sell their drugs in the US for no more than the lowest price they choose to accept from any other developed country. That way, the pharmaceuticals can decide whether they want to accept the lower prices other developed countries offer, or not, but they won’t be allowed to arbitrage massive prices in the US, and much lower prices elsewhere (other than truly poor countries).

    I expect that, ultimately, that will reduce prices substantially here, while other developed countries will largely agree to pay higher prices (once the environment changes such that they can no longer get away with constant free-riding), resulting in a fair apportionment of costs across all developed countries.

  21. If price controls mean no R&D because of limited profits the free market of only the rich can afford the high cost of multi-billion dollar profits would also limit profits and therefore R&D. R&D would be focused on botox injections & erectile dysfunction while little actual sicknesses gets researched since sick people generally earn less so you can’t profit from them as much in a free market as luxury meds.
    My meds are $180K/yr for an incurable condition, “chemo” forever. Many are diagnosed as kids. Average US income is $50K & it has floated around there for decades. Even the insurance negotiated price of around 50% is above the average. About 20% of the US has some sort of autoimmune disease & require similar meds. Free market dictates the market can’t bear $180K when average earnings are $50K. So we go without the $180K meds or at least the $50K income people go without. The free market healthcare side of Libertarians & Conservatives ends up in a very ugly place of death being the only way to boycott prices of medicine.
    Maybe free market healthcare could work but reality is much different than a free market.
    Reality is: Corruption with corporations buying favors: Tax payers & donors fund much research: Healthcare prices have way out paced income: A cancer drug that was set to profit $4B ends up working better than expected so they jack the price up to profit $12B: Other countries have price controls so the country who doesn’t control costs is making up for it.

    1. I think you paint “free market healthcare” with too broad a brush. It’s difficult to implement market-anything in an environment of strict control and economic privilege, and still call it “free market.” As a general rule, the US government restricts the development of drugs, the marketing of drugs, the sale of drugs, and access to drugs. Meanwhile, the US government subsidizes the research of drugs and the paying for drugs.

      How the hell do you execute a free market approach without overhauling that entire process? And how can you criticize the free market in that context?

      1. Exactly. But some libertarians whine about one change claiming no free market. You can’t have a partially free market. Much like gun control thinking they can make all guns go away, or The War On Drugs thinking they can end all recreational drug use. These things are Utopian dreams not reality. You end up with only criminals having guns, worse drugs on the street and creating a protected business class.

        An actual free market may work, but how do you unring that bell?

        1. Agreed, but I’m not sure it can be classified as a “utopian” struggle. No political philosophy or party gets everything it wants, so everybody is always faced with modifying their approach in an environment of compromise. But your underlying philosophy should still be a beacon to guide your view within the proper context. There is a market “answer” to health care. It’s a lot less cut and dried than “let the market dictate”, but you don’t throw the baby out with the bath water.

  22. Slowed drug development means shorter and sicker lives.

    What we have are drugs for side effects of drugs.

  23. Drug companies always say they need their high prices to pay for research, but that is baloney. They spend a lot more money on corruption (“gifts” to doctors, phony medical journals) and on advertising than they spend on research.

    When they do research, t is directed mainly at finding treatments that people will take every day for 30 years. The research that finds new drugs that cure diseases is funded mainly by the public.

    So we don’t stand to lose very much if we deny them their windfall profits

  24. I was diagnosed with Parkinson’s disease at the age of 37. My father had it, so I don’t know if it’s my luck or heredity. My first problem was fine motor skills, especially writing. After five years of waiting, I saw a neurologist who confirmed my fears. I was immediately started on Sinemet. All of this was 22 years ago. I will be 59 in a few days. I have had good luck with the Sinemet and other meds like Mirapex, but I was extremely tired of it. I have also noticed cognitive decline, but that is also related to a now-removed brain tumor.i had to look for an alternative treatment. I read in a health forum of a herbal clinic in Johannesburg who has a successful treatment to P.D, i immediately contacted the herbal clinic via their website (www . Healthherbalclinic . weebly . com) and purchased the parkinson’s herbal formula. I received the parkinson’s herbal treatment via courier and immediately commenced usage, i only used the herbal remedy for 7 weeks all my symptoms were unbelievably reversed, i did another series of test i was confirmed free of parkinson’s. Visit (www . healthherbalclinic . weebly . com) or email (healthherbalclinic @ gmail . com)

  25. I was diagnosed with Parkinson’s disease at the age of 37. My father had it, so I don’t know if it’s my luck or heredity. My first problem was fine motor skills, especially writing. After five years of waiting, I saw a neurologist who confirmed my fears. I was immediately started on Sinemet. All of this was 22 years ago. I will be 59 in a few days. I have had good luck with the Sinemet and other meds like Mirapex, but I was extremely tired of it. I have also noticed cognitive decline, but that is also related to a now-removed brain tumor.i had to look for an alternative treatment. I read in a health forum of a herbal clinic in Johannesburg who has a successful treatment to P.D, i immediately contacted the herbal clinic via their website ( and purchased the parkinson’s herbal formula. I received the parkinson’s herbal treatment via courier and immediately commenced usage, i only used the herbal remedy for 7 weeks all my symptoms were unbelievably reversed, i did another series of test i was confirmed free of parkinson’s. Visit ( or email (

  26. the answer is simple. Government will no longer purchase ANY drugs. Let the patients who need them purchase them.

    Some years back I lived in Canada… had a bad hayfever season, friend who was a doc told me to head on down to the local el cheap drug store and buy this certain antihistamine, over the counter. He did not even charge me for the “visit”. I went, thirty caps for five bucks. Affordable. Interesting thing, the dumb things WORKED far better than anything I’d tried before with NO nasty side effects (feeling drugged, etc). That became my Go To for that problem. Couple years on I was back in the states.. needed that drug, not available OTC,, scrip only. Had to pay a doc $135 to look down my throat, tell me I had hayfever (REALLY!!??!! Imagine THAT!!) and he wrote a scrip,, for the same drug, NOW I had to go to a pharmacy, pay $35 for ten caps. SAME EXACT DRUG. Next time in Canada I bought a half dozen boxes of 30 caps, for about what the ten cost me here.

    THIS RACKET is what must end. Same exact drug, dose, manufacturer, etc. THIS is what’s wrong with our “health care”. Delist about 90% of the drugs out there. Heck, the pharmacists should be recommending these things based on customer needs.

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