Are Democrats serious about fixing what’s broken in the nation’s healthcare system? Instead of pushing for a patent-affordable, provider-friendly system in partnership with the health insurance companies, they continue to push for a one size fits all system that doesn’t use market forces to bend the cost curve downward.
To lower government spending on drugs, Nancy Pelosi is pushing for a process that would allow government-appointed arbitrators to unilaterally set the price of medicines and therapies.
Currently, prices are set through negotiations between drug companies, private insurers, and healthcare providers. Under her plan, when a dispute arises these supposedly independent arbitrators would be empowered to set prices, probably well below fair-market value under almost any interpretation, because the government bureaucrats who appointed them would apply pressure to bend the cost curve downward.
That’s not good for medical innovation. It costs almost $3 billion and takes more than a decade to bring a drug from the lab to pharmacy shelves.
Companies must recoup costs, not just for what works but for what doesn’t, in order to stay in business. The stockholders and corporate managers who bring this all about deserve the financial rewards available to them when their risk-taking pays off because it improves the quality of life for us all.
Under the Pelosi proposal, Medicare officials dissatisfied with negotiated prices could ask arbitrators to intervene. Each side of the transaction would be given a chance to justify the price they’re seeking and then the arbitrator would choose a price. Everyone involved would be legally bound to accept the decision, even if it fell outside the range of what either party had put on the table.
Companies will be less willing to roll the dice on developing a new drug if they know the government will underpay for medicines.
Just look to Europe to see this idea doesn’t work. In the 1970s, European companies made more than half the world’s medicines. Throughout the decade though, European governments ratcheted up price controls so by the 1980s, drug development on the continent plummeted.
Today, less than a third of new drugs come from there. Meanwhile, the United States has led the world in drug development for over 30 years.
American companies are currently developing 4,000 new treatments. Among them could be a new cure for cancer, Alzheimer’s, or diabetes.
All of that is put at risk by the Pelosi proposal. If her vision of “binding arbitration” becomes law, these treatments may never see the light of day. Which makes her plan worse than the disease she proposes to cure.
Peter Roff is a senior fellow at Frontiers of Freedom and a former U.S. News and World Report contributing editor who appears regularly as a commentator on the One America News network.