House Speaker Nancy Pelosi recently unveiled the Democrats’ prescription drug plan. It is a big government monstrosity that may make ObamaCare look like free-market health care. The legislation was introduced as H.R. 3 signifying that this is one of the House leadership’s top priorities. Hearings on the bill have already been held and Speaker Pelosi is planning to bring the bill to the floor sometime this month.
So, what’s wrong with the plan? Let’s start with price controls. The plan gives the Secretary of Health and Human Services authority to set prices for at least 25 and as many as 250 prescription drugs that lack two or more competitors.
HHS must set the price for these drugs at a level that must be lower than 120% of the weighted average of the drug prices in six countries.
The price applies not just to government programs but to private commercial sales as well. This will impose price controls on the entire pharmaceutical market.
Pharmaceutical companies can try to negotiate better deals, but if they refuse to negotiate or abide by the government’s prices, they will face a 65% “penalty” (tax) . The tax increases each quarter until it reaches 95%.
The tax is on gross, not net, receipts, so if a company sold a drug for $100, but it cost $50 to make it, the 65% tax would mean it would cost the company $15 to sell the drug! Since the government prices are based on foreign governments, many of which have price controls themselves, this will force pharmaceutical companies to sell their products at a loss.
You don’t have to be Einstein to figure out what will happen to the supply of drugs if this plan becomes law.
But that’s not the worst of it. The plan allows the government to use “value assessments” to further lower drug prices.
Value assessments attempt to measure the value of a medicine by assessing a medicine’s effectiveness combined with how much the medicine contributes to the patient’s quality of life.
Quality of life is measured by how much one’s physical condition diverts from “perfect health.” The value of a drug is reduced for anyone not in perfect health since the drug is of less use if, say, it will not completely cure a condition. The result is government limits access to medicine for certain people because the government has determined the treatment would not actually improve their quality of life.
This scheme suffers from the same flaw as all central planning—there is no way for government bureaucrats to objectively and accurately measure an individual’s quality of life. Instead, that depends on what the individual considers a quality life, something that no bureaucrat can determine or even know. Of course, the idea that whether someone is “deserving” of prescription drugs or other forms of medical treatment violates any notion of limited government that is established to protect—rather than violate—our natural rights.
The leading group in the U.S. doing this is the Institute for Clinical and Electronic Review (ICER). ICER puts a value of around $150,000 for a healthy individual and reduces the value for those not considered in perfect health. If Pelosi’s plan goes into effect, ICER could become the U.S. equivalent of the National Institute for Health and Care Institute (NICE) which publishes guidelines for the use of technology.
As stated above, the House is expected to vote on this bill later this month. House passage will make price controls and rationing mainstream ideas—and we already see Republican senators and the Trump administration supporting price controls in health care. History shows the supporters of nationalizing health care will not give up; they will keep pushing the envelope, grabbing as much power as they can gather, and then come back for more. Campaign for Liberty will continue to push back against all efforts to expand government control of health care. Please support our efforts.
Here is Naomi Lopez Bowman of the Goldwater Institute on ICER’s recommendations for treatment of Duchenne Muscular Dystrophy.
Here is tax expert Ryan Ellis on the 95% tax on prescription drugs.