Though policymakers are seldom willing to admit it, some ideas are so dumb they should only be mentioned as examples of what not to do.
With apologies to William Goldman and “The Princess Bride,” the most infamous of them involves getting involved in a land war in Asia. However, just behind that is the idea that government price controls work.
Like communism, price controls have failed everywhere they’ve been tried – unless the intent of those who imposed them was to damage the economy. If that was the case, they worked splendidly. Why, then, do people with advanced degrees from some of the nation’s finest universities keep proposing them as a solution to the problem of affordability?
Prices are signals. They tell us about quality, availability, effectiveness, need, demand, and other things that are useful to know as producers and consumers. There are many things the government does in ways that are not objectionable, but setting prices is not one of them. It doesn’t have the information needed to do so.
Even if it did, what it learned would probably be ignored due to political concerns. When the government sets the price of something, it usually does so based on input from lobbyists and other special interests that either have an ox in danger of being gored or some kind of skin in the game.
The people who make health care decisions for the U.S. government are inundated with those kinds of people. They hold enormous sway, not just because they sell so many pharmaceuticals but because the U.S. government buys so much of what they produce, it can make the rules for the entire marketplace.
If you’re thinking that’s not fair and sounds like a monopoly – which it isn’t, strictly speaking – you’re looking at things the right way. One group that has outsized power in this conversation is the pharmacy benefit managers who work on behalf of the big insurance companies.
What pharmacy benefit managers do, and this may be an oversimplification, is manage prescription drug benefits on behalf of health insurance companies, employers and the Medicare Part D drug program, which brings the government directly into the discussion.
If you watch streaming TV, you’ll see ads running rotation that point fingers at the pharmacy benefit managers for causing an increase in the price of some prescription drugs and for blocking consumer access to those that generate for them a lower profit.
These pharmacy benefit managers, which Obamacare created to help keep prices down, are instead driving them up. They’re strong supporters of the government regulation of prescription drugs and mirror the activities of Medicare-for-All in the private sector.
As middlemen who act as third-party authorizers between patients and physicians, the largest of the pharmacy benefit managers have arguably taken control of the prescription drug market. Their dominance in the healthcare space allows them to make enormous profits instead of keeping consumer costs down.
They are in favor of price controls that distort markets in their favor. Instead of saving money for patients, they’ve caused instances where healthcare consumers were unable to count some pharmacy co-pay assistance toward their annual deductible. Costs went up, instead of down.
It should have been predictable – and probably was. Pharmacy benefit managers are blocking patient access to cost-saving generics and other alternatives because they don’t produce the same returns on investment as brand-name pharmaceuticals. Pharmacy benefit managers fees, wouldn’t you know, are tied to the cost of medicine. The higher the price, the more they make.
Some also make money at the pharmacy level because they own many of them. By directing patients to the company store, as it were, they’ve found a way to game the system that needs to be examined on the grounds it may be restraining trade.
In any event, the elements of what was needed for government price controls on medicines became law on a party-line vote, enriching the pharmacy benefit managers and the biggest health insurers at the expense of consumers.
Liberals used to be outraged by that kind of thing. Now they’re applauding it. Maybe they need to check their meds.
Peter Roff is former U.S. News and World Report contributing editor and UPI senior political writer now affiliated with several DC-based public policy organizations. He writes for numerous publications and appears regularly on international television talking about U.S. politics. You can reach him at RoffColumns@gmail.com