Clinton Unveils "Bold" Plan For Pharma: Drug Price Controls

In yet another fit of populist rage, Hillary Clinton is set to unveil her 'fairness doctrine' for the drug industry. As Reuters reports, Clinton will create an "aggressive new set of enforcement tools," including the ability to levy fines and impose penalties on manufacturers when there has been an "unjustified, outlier price increase." In other words - government-imposed price controls - ask the Venezuelans how that ends...

 Hillary Clinton said on Friday that if elected to the White House, she would create an oversight panel to protect U.S. consumers from price hikes on life-saving drugs and import alternative treatments if necessary.

 

Clinton, the Democratic presidential nominee, will seek to give the panel an "aggressive new set of enforcement tools," including the ability to levy fines and impose penalties on manufacturers when there has been an "unjustified, outlier price increase" on a long-available drug, her campaign said.

 

"Over the past year, we've seen far too many examples of drug companies raising prices excessively for long-standing, life-saving treatments with little or no new innovation or R&D," Clinton said in a statement.

 

If Clinton defeats Republican Donald Trump in the Nov. 8 election, she will need the support of the U.S. Congress to implement key measures she has proposed, such as levying fines on manufacturers responsible for unjustified price hikes.

Lawmakers have in the past resisted efforts to introduce controls on pharmaceutical prices.

Drugmakers have insisted that lowering or limiting drug prices will hamper their ability to invest in research and lead to fewer new therapies.

But do not worry, government knows best...

"Our pharmaceutical and biotech industries are an incredible source of American innovation and revolutionary treatments for debilitating diseases," said Clinton. "But I’m ready to hold drug companies accountable when they try to put profits ahead of patients, instead of back into research and innovation.”

 

The oversight panel would be made up of representatives from existing public health and consumer protection agencies who convene to examine the scope of a drug increase, the manufacturer’s production cost and the treatment’s relative value to patients and public health, Clinton’s campaign said.

 

In cases where a determined unjustified price hike is accompanied by insufficient market competition, Clinton’s administration would intervene to purchase alternative drugs from comparably regulated markets or assist manufacturers in bringing the product to market in the United States.

 

Dr. Aaron Kesselheim, an associate professor at Harvard Medical School, called it a “bold idea” to get the federal government “involved in helping stabilizing some of these generic drug markets.”

So to sum up:

If a price hike was unjustified, it would have the power to intervene directly in the marketplace, by imposing penalties on the offending drug company or funding competitors’ efforts to create competing products in order to bring down prices.

 

Clinton’s plan would also allow Americans to import certain drugs from other countries, like Canada, which currently pay significantly less for the same pharmaceutical drugs.

 

Congressional Republicans, the Obama Administration and industry groups, however, oppose the plan, making it unlikely to pass anytime soon.

On the other side of the argument is The Manhattan Institute who argue that drug price controls hurt patients the most...

Proposals to control drug prices may have populist appeal, but they miss the mark by ignoring the root cause of high health care costs—poor health—and the relatively modest role that medicines play in U.S. health care spending. More important, the assumption that European-style price controls would have no effect on innovation is deeply misguided.

 

Because America is the world’s largest pharmaceutical market, its market-pricing structure for pharmaceuticals generates the lion’s share of the profits necessary to fund drug development. Cutting into these profits would dampen incentives for innovation, shorten lives, and impose higher costs on future patients. Price controls are a losing proposition—for industry and for patients who receive little, if any, benefit from currently available therapies.

Key Findings

U.S. drug spending is not out of control; reducing it will not substantially affect overall health care costs.

 

  • U.S. spending on drugs accounts for a smaller share of total health care spending—about 10 percent—than in Europe, where drug price controls are in place.
  • U.S. drug spending as a share of health care spending is expected to remain flat; the out-of-pocket share of drug spending is expected to decline.

 

Drug spending is cyclical. After a decade of low increases in drug spending, driven by generic competition (drug spending by private insurers actually declined by 0.5 percent in 2013), more new, powerful drugs are coming to market. Eventually, these drugs will lose patent protection and become cheap generics.

 

Drug companies do not earn excessive profits. Investors treat the pharmaceutical industry as 25 percent–37 percent riskier than other industries and therefore require a higher rate of return. The industry’s profit margins reflect the greater risk and long timeline required to develop successful U.S. Food and Drug Administration (FDA)–approved medicines.

 

Drug price controls cost more than they save by slowing innovation.

  • Modest price controls that reduce pharmaceutical industry revenue by 20 percent would shorten life expectancy for children today by nearly one year by 2060, imposing costs of $51,000 per capita.
  • Aggressive price controls that reduced prices by half would slash the number of products under development by 30 percent–60 percent.

 

From our perspective the intertwining of The FDA's process, lobbying dollars, and government-sponsored healthcare rights for all is bad enough, but now adding yet more government regulation on what is 'fair' pricing makes the whole thing a farce... one thing is for sure, it will not improve the situation for the majority and the money flow into DC will increase dramatically as winners (and losers) are selected.