https://www.city-journal.org/price-controls-on-pharmaceuticals
The American pharmaceutical industry is the most innovative in the world and saves more lives than any other institution. So, of course, it is also the national villain.
In this autumn’s election, once again, voters say that one of the top issues—the top issue, in some polls—is lowering the price of prescription drugs. Politicians of both parties ritually denounce Big Pharma for profiteering. In his first press conference as president, Donald Trump accused drug companies of “getting away with murder,” and Bernie Sanders has called the industry’s greed a “public-health hazard to the American people.” A central plank in the “Better Deal” that Democrats are promising in the midterm elections is for the federal government to “negotiate” drug prices, and some progressives don’t even make that semantical pretense. They call for outright price controls, if not the “deprivatization” of the industry, on the grounds that Big Pharma is too powerful to be constrained by market forces.
At one level, this is just political opportunism. Big Pharma is easy to resent because its products are so essential, and it’s easy to attack because it’s actually not so big. Of every dollar that Americans spend on health, only a dime goes for prescription drugs. The lion’s share of health spending goes to hospitals and people in the health-care professions, whose relatively high fees and salaries are largely responsible for Americans bearing the world’s highest health-care costs. But how many politicians want to go after doctors and nurses? What Democrat would dare arouse the ire of the health-care unions? Much easier to scapegoat the greedy drug companies.
The critics do get one thing right: the pharmaceutical industry is no paragon of free-market capitalism. Companies spend much of their time appeasing regulators instead of satisfying customers. The bureaucratic delays and complexities discourage innovation and competition, allowing some firms to profit by gaming the rules rather than developing new drugs. The system is so opaque and convoluted that both parties agree that it needs to be reformed.
For Democrats, the answer is a system modeled on Canada and European countries with nationalized health systems that use their monopoly power to dictate which drugs are available at what price. On average, Americans spend more money on prescription drugs than people do in those other countries, a favorite talking point for Democrats advocating price controls and “Medicare for All.” As a candidate, Trump endorsed the big-government approach to controlling prices, and, as president, he has personally bullied pharmaceutical executives into rolling back some prices. But so far, thanks to some smart appointments, his administration is pursuing more sensible reforms. Instead of joining the march toward nationalized health care, it is focused on reviving market competition.
These reforms are moving forward at a remarkably brisk pace (for Washington), but there’s always the danger that Trump’s populist instincts and a resurgent Democratic Party could prevail. Politicians of both parties know how popular Democratic ideas on drugs are—and how unpopular Big Pharma is. Public-opinion polls by the Kaiser Family Foundation show that most Republicans as well as Democrats support tighter regulation of prescription-drug prices. Three-quarters of Americans favor outright price controls on some drugs, and more than 90 percent want the federal government to “negotiate” lower prices across the board.
