Price controls on prescriptions mean fewer jobs, not lower inflation
The Biden administration continues to push a trillion-dollar tax-and-spend plan. After spending the second half of 2021 dismissing rising inflation as “transitory,” the administration now claims that spending more money and raising taxes higher will help reduce inflation.
One way they say it will do this is by enacting socialist price controls on the healthcare system that will (at first) reduce the cost of prescription drugs.
Even Biden’s advisors know better.
Price controls have never worked. While they may reduce the cost of products initially, they quickly lead to shortages and ultimately harm consumers. For instance, when price controls were imposed on gas in the 1970s, they led to long lines and shortages at gas stations.
Americans are being hit hard by inflation, but prescription drugs are one of the few items whose prices have remained stable during the Biden years.
According to the Bureau of Labor Statistics, the price of prescription drugs increased by just 1.9 percent over the past year. In contrast, the consumer price index for all items increased by 8.6 percent. And it makes sense to whom in the Biden administration to put price controls on the product increasing in price by 1.9 percent?
Rather than helping reduce costs, price controls will harm the economy and threaten high-paying manufacturing jobs.
The proposal would give federal bureaucrats the power to set the price of medicines. If a manufacturer does not abide by this government-set price, they are hit with a 95 percent excise tax on the revenues of the drug.
This would create a vast new tax and regulatory structure that could be applied to the entire healthcare system and eventually lead to socialized healthcare.
Foreign countries frequently utilize price controls on their healthcare system to the detriment of patients and the development of new cures.
For instance, Canadian patients wait an average of 19.8 weeks from referral to treatment. By comparison, 77 percent of Americans are treated within four weeks of referral, while just 6 percent wait more than two months.
In the United Kingdom, there was a shortage of 10,000 doctors and 43,000 nurses in 2019, with 9 in 10 managers in the National Health Service saying that too few doctors and nurses presented a danger to patients.
The U.S. is currently a world leader when it comes to medical innovation. According to research by the Galen Institute, 290 new medical substances were launched worldwide between 2011 and 2018. The U.S. had access to 90 percent of these cures, a rate far greater than comparable foreign countries. By comparison, the United Kingdom had access to 60 percent of medicines, Japan had 50 percent, and Canada had just 44 percent.
Price controls would lead to fewer new medicines. In fact, a study by the Council of Economic Advisors estimated that price controls could lead to 100 fewer lifesaving medicines over the next decade and could reduce the life expectancy of the average American by four months.
The need for strong medical innovation should be clear to all in the wake of the coronavirus pandemic. U.S. manufacturers succeeded in developing vaccines and treatments for COVID-19 at some of the fastest rates ever. Price controls would disrupt this medical innovation and threaten our ability to fight future pandemics.
In addition to harming the healthcare system, price controls would threaten the economy and quality manufacturing jobs.
Medical innovation, directly and indirectly, supports over 4 million jobs across the U.S and in every state, according to research by TEconomy Partners, LLC. These are high-paying, quality jobs — the average annual wage of a pharmaceutical worker in 2017 was $126,587, more than double the average private sector wage of $60,000.
The left does not support price controls on medicines because they want to lower costs, but because they want to transform the healthcare system toward a socialist, “Medicare for All” system. They would ration health care as Canada and Britain do. Sick people wait.
This is the new version of gasoline lines. Politicians put price controls on new medicines. Fewer medicines are invented. You wait in line for access. At least the Americans stuck in Jimmy Carter’s gas lines were not sick. Biden’s rationing will hurt more.
Grover Norquist is the president of Americans for Tax Reform.