House Democrats considering bucking Speaker Nancy Pelosi on a Medicare drug bill are doing the right thing. The bill would break one of the few government programs that doesn’t need fixing.
The Washington Times reports that 10 centrist Democrats are seen as reluctant to support a Pelosi-backed effort to have the government “negotiate” pharmaceutical prices in the Medicare Part D prescription-drug program. One of them, California’s Scott Peters, says he is quite likely to vote against the bill because it would bring about unwise government price-fixing while deterring drug companies from doing research into new medicines.
With Democrats holding just an eight-seat majority in the House, and with all Republicans expected to oppose the bill, it would take only four Democrats voting against the bill to kill it. Good.
As I explained in an April 29 column, Part D has worked far better than even its creators envisioned. Competition among insurance companies and drugmakers and consumer demand for affordable prices has kept Part D premiums significantly lower than was anticipated when Congress created the program in 2003. If Democrats back then had been successful in letting government set the prices, the average monthly premium today would be at least five dollars, more than 10%, higher than it actually is.
That’s not an opinion; it is fact, based on the provisions Democrats then were requesting.
Moreover, government pricing surely would have forced numerous insurers from the market, thus greatly reducing the options available to seniors that can be more closely tailored to their individual needs. As it is, insurers hustle to offer different options to different seniors, some of whom want more deluxe plans, while others want only basic coverage. This year, 30 different plans are available under regular Part D, with another 27 available via Medicare Advantage. For seniors assessing their personal health situations while balancing their checkbooks, this plethora of choices is a far better situation than the one-size-fits-most approach that government intervention would produce.
Now, Peters and his fellow centrist Democrats raise a point perhaps even more important. Especially because of the exhaustive process for drug approval mandated by the U.S. Food and Drug Administration, the research and development costs for new medicines are significant, often exorbitant. Indeed, for each new medicine, the average R&D cost up to the point of FDA approval is $2.6 billion. And 7 of every 8 potential new medicines fail the process.
If the heavy hand of government price-fixers takes away the ability of drugmakers to recoup these expenses via market mechanisms, scores of life-improving and lifesaving drugs will never see the light of day.
Liberal politicians like to use American pharmaceutical companies as punching bags, but the crucial nature of pharmaceutical R&D efforts shows itself in times of crisis. It wasn’t government scientists at the Centers for Disease Control and Prevention who developed coronavirus vaccines with astonishingly record-breaking rapidity; it was the private drug companies. It is those companies, some of them relatively small, that gather the world’s best medical-research scientists. Indeed, what many analysts say may prove the most promising vaccine of all is made by a tiny company, Novavax.
It is precisely the smaller companies, ones that try to fill niche markets for patients with special health needs, that would most likely be jettisoned from Part D participation through the leveling and standardization that are part and parcel of government price-fixing intervention.
Peters and his centrist colleagues have valid concerns. They should make clear that Pelosi’s major overhaul of Part D is a nonstarter. Sometimes, the best prescription is just to stay the current course.
