President Biden and Vice President Harris denounce inflation Price gouging and “corporate greed”“They are imitating Venezuelan dictator Nicolas Maduro, who, after all, makes the same or similar claims about greed every time. He imposed or Strengthening price controlsHis actions in this regard, and the present ruin of his once prosperous country, are no mere coincidence.
Unfortunately, Biden and Harris are also implementing price controls in the healthcare sector through “deals” with pharmaceutical companies.
Price controls have a long and disappointing track record in Venezuela and other countries where they have been tried, when bakeries were forced to sell bread at a loss. They didn’t bake very much Or they stopped baking bread altogether, resulting in bread shortages and price hikes for everyone, prompting President Maduro to once again blame bakers for their greed.
Former President Donald Trump’s campaign would do well to highlight the dire impact of price controls, which the Biden-Harris administration’s drug policies could revoke if the Republican candidate wins in November, touting an early victory in 2025.
Biden’s so-called Inflation Control Act promises to lower drug prices, but to achieve this, 95 percent excise taxImpose penalties on pharmaceuticals that do not comply with government price directives. This will harm consumers. The result, paradoxically, will be higher prices, less access to needed medicines, or a combination of both.
We’re all familiar with television commercials for prescription drugs: Smiling actors cavort in a joyous ambiance while a narrator quietly reads out a lengthy list of side effects mandated by the Food and Drug Administration (FDA). If federal law were to come with such a warning, this bill’s warning would read, “This law purports to cap drug prices, but side effects could double what individuals pay for their drugs or limit access to them altogether.”
While the implementation process of the recent agreement on drug prices is already underway, it’s not too late for federal lawmakers to correct mistakes that could drive up prescription drug prices and lead to shortages of breakthrough medicines. The “negotiated” prices don’t go into effect until 2026.
Price negotiations and decisions don’t take place in a vacuum. In theory, the Secretary of Health and Human Services is supposed to take into account the cost of research and development of a drug, the cost of production and distribution, and other economic and medical factors. But in practice, that means that if regulators need to do anything, they have to pay lip service to it.
The history of regulatory cost-benefit analysis is full of examples of this. For example, the 1993Presidential Decree No. 12866The Supreme Court directed agencies to “design their regulations in the most cost-effective manner” that would “minimize the burden on society” and ensure that the benefits of regulation outweigh the costs. But history has shown that regulators’ unfounded assumptions distort the standards. As Justice Antonin Scalia pointed out, Michigan v. EPA“Imposing billions of dollars in economic costs in exchange for a few dollars in health and environmental benefits cannot be considered reasonable or even ‘appropriate,'” he said, criticizing regulators.
In the absence of often objective standards for regulations that meet the standards of theoretical cost-benefit analysis, the Secretary of Health and Human Services has nearly total discretion to ensure that appropriate considerations are given in price negotiations. But the price directives she issues are anything but discretionary. They carry the weight of the government’s iron fist.
The Anti-Inflation Act’s excise tax would double prices or do worse, the exact amount depending on some ill-defined threshold.IRS RulemakingIf a company sells a drug for $100, the IRS might interpret the base price as $100, and the company might add $95 in sales tax for a total price of $195. The IRS might also interpret the base price as $100, meaning the government takes $95 and the company only receives $5.
Given the enormous power delegated to the Department of Health and Human Services, it is not surprising that pharmaceutical companies are bowing before the department’s clenched fist.
Faced with this Stalinist approach, companies will be less willing to invest in the research and development that will lead to the breakthrough medicines of tomorrow. These companies are for-profit businesses, and employees and executives will take their talents and skills elsewhere if they are not properly rewarded for their efforts. This is basic economics.
Over 40 organizationsIn late June, he wrote to House Speaker Mike Johnson (R-Louisiana) and Senate Republican Leader Mitch McConnell (R-Ky.) urging market-based reforms to this terrible policy.Replying the same day“Make no mistake: MAGA Republicans want us to pay more for prescription drugs. We will not allow that.”
The use of scare rhetoric like “MAGA” and the backlash against this provision from radical progressives are not surprising, but the harm this policy will cause cannot be ignored.
Certainly, pharmaceutical companies deserve scrutiny on many levels. Seniors and all Americans need pro-market reforms that lower drug prices and hold pharmaceutical companies accountable for failures. Such reforms would lower prices, avoid drug shortages, and foster the continued development of tomorrow’s breakthrough medicines.
This is a critical battle for the future of our country. The clock is ticking. Harris believes she can win this, backed by a sympathetic left-leaning media, but that could work against her.
The Trump campaign needs to focus on linking the inflation we are all suffering from to the left-wing Democratic policies that characterize the Biden-Harris administration, which will send a winning message to the Trump-Vance campaign and make it easier for the next Trump administration to win early on.
Doug Branch is president of Phronesis Insights.
