Clinton Wrong on Drug Price Regulations

 

Hillary Clinton is certainly predictable. She thinks the solution to ObamaCare’s over-regulation of healthcare is – more regulations. True to her progressive ideology, she believes the solution to every problem is more government.

Clinton recently proposed caps on out-of-pocket drug expenses, tax credits to help families deal with soaring costs, forcing drug companies to spend more on research and development, and obliging them to invest more in the production of generics.

Those who have been following my recent series on rising generic drug prices now understand the real problem is lack of competition and slow FDA approval of new generic drug applications. The lack of competition is largely due to consolidation of drug manufacturers, encouraged by ObamaCare, and the difficulty of new drug makers getting approval from the government.

The FDA currently has a backlog of about 4,000 applications to manufacture a generic drug – up about 40 percent from two years ago. In 2005 the FDA averaged 16 months to approve a generic drug application. In 2010 the average approval time rose to 27 months. In 2015 the average FDA approval for a single generic application takes 50 months.

Scott Gottlieb, physician and resident fellow at the American Enterprise Institute, writes in The Wall Street Journal that the cost of FDA approval has also gone up drastically. He notes that filing one of these applications used to cost as little as $1 million but today can run as high as $20 million, sometimes more. This means that old but “niche” drugs may not have competition from other generic entrants, creating an opening for companies to extract windfall profits by driving up the prices.

Gottlieb also says it’s important to distinguish between new medicines that are priced at a premium because they represent genuine innovation and risk-taking, and drugs that are priced high simply because investors are manipulating regulatory failures. He says if Clinton was actually serious about helping patients, she should focus on lowering the cost and time necessary for generic-drug entry, thus reducing the chance of perpetual monopolies for old, off-patent drugs.

Clinton’s approach is a populist appeal to lower drug prices. But she fails to discuss, or even comprehend, the real impact will be fewer innovative new drugs and therefore lower quality healthcare. Rather than solve the real problems contributing to higher drug prices, she wants to artificially lower prices by government regulation; a move destined to further lower competition in a marketplace that needs more.

In reality, high-cost specialty drugs constitute a fraction of healthcare spending. Overall, the cost of drugs – at about 10% of total healthcare spending – hasn’t changed in 50 years.

Gottlieb summarizes the problem: “The real reason that Mrs. Clinton’s rhetorical stratagem will sell is that ObamaCare has left many consumers badly insured for “specialty” drug costs. It has done so by popularizing “closed” drug formularies that only cover a fraction of these new medicines, and leave consumers carrying the full cost of drugs not on the formulary lists. It has also promoted high deductibles, and the use of eye-popping co-pays.”

 

This is but one of many problems consumers will experience with ObamaCare as premium costs, deductibles, and co-pays rise to cover the real cost of this expanded government entitlement. Unfortunately, progressives like Clinton will continue to offer solutions that represent more government intrusion into our healthcare, which is the real problem in the first place!

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