Americans spend over $300 billion on prescription drugs every year—an enormous number that continues to grow. But while Americans are eager to fill their prescriptions that treat everything from common illnesses to life-threatening diseases, many are dismayed by rising costs. What can be done to make them more affordable?
The debate over how to lower drug prices highlights the difference between liberal and conservative approaches to problem solving. Liberals generally favor the use of government power to command the results they want, so it should be unsurprising that their preferred solutions to market challenges are government subsidies and price controls. Conservatives generally favor freer markets, and are therefore more likely to look at what's working and try to build on that success, often by removing barriers so that markets can work more effectively.
The liberal solutions, subsidies and price controls, are naturally connected to each other. Once the government is in the business of subsidizing something, it has an interest in controlling the price. The problem, of course, is that government is not your average purchaser; its size means it is usually the dominant purchaser, giving it the ability to set the rules for everyone. For liberals, this is a feature, not a bug: It means that the government gets to extend its control over the market and therefore, it is hoped, shape it in the desired way.
Conservatives, by contrast, rely on increased competition to deliver consumer savings. Their solutions include increased competition between brand-name drugs and their generic counterparts, which they believe will lower prices while still preserving the incentives pharmaceutical companies have to invest in expensive and risky drug research and development. Supporters of such free-market ideas have allies in the current FDA leadership, led by Commissioner Scott Gottlieb, who has prioritized generic drug reviews to enhance competition, specifically targeting medicines for which there is little or no competition. The FDA is also working to get more products to market that will compete with expensive biologic medicines.
While the FDA is playing its role to increase competition, conservatives should also take notice of the private sector's role in driving down costs. A recent opinion piece in the New York Times written by the head of a consortium of leading U.S. companies detailed how they have banded together to get better deals on healthcare and prescription medicines for their employees. By working with pharmacy benefit managers, CVS Caremark and Optum, as well as data providers, these companies are using their scale and new data collection to negotiate better deals on healthcare for millions of their employees.
The liberal solutions both ignore and threaten this private-sector-led progress. Liberals are proposing, for example, price controls in Medicare Part D, a highly popular prescription drug program for seniors that embraces market competition and consumer choice, and consequentially one of the few government programs to come in under budget. Adding such controls is terrible policy that virtually guarantees a drop in seniors' access to drugs, sticking American taxpayers with a bill that only promises to rise.
Liberals would also like to meddle with insurers' discounts on medicines, proposing regulations that they believe will ensure these discounts are passed through to consumers. But pharmacy giant CVS Health is already addressing this problem, giving employers the option of passing those savings on per employee or spreading the savings across the premiums of all employees – or even something in the middle.
The fact remains that Americans have access to more drugs earlier than anywhere else in the world, life-saving innovations that will only multiply and become more affordable in a robust market. Let's not crush that with bad policy.
April Ponnuru (@AprilPonnuru) is a contributor to the Washington Examiner's Beltway Confidential blog. She is a senior adviser at the Conservative Reform Network. Previously she was an adviser to Jeb Bush's presidential campaign.
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