Price controls for prescription drugs probably won't stop price increases - Watchdog.org
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Price controls for prescription drugs probably won’t stop price increases

By   /   February 24, 2016  /   News  /   No Comments

In a presidential campaign marked by nasty rhetoric and little actual discussion of policy, one idea espoused by candidates of both parties would add layers of government red tape to how Americans buy prescription drugs.

A handful of states, led by California, might be beating the would-be-presidents to the punch.

Bernie Sanders and Hillary Clinton have voiced support for federal regulations on the prices of prescription drugs — though neither will point out that slowing the growth of drug costs was supposed to be a key component of the Affordable Care Act — and both candidates gleefully blast drug companies supposedly making piles of cash off unsuspecting, or at least helpless, Americans.

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CALIFORNIA VOTERS TO DECIDE: A ballot measure in November will ask California voters if they want to institute price controls for drugs in some government-run health insurance programs.

On the Republican side, Donald Trump has made noise about the same issue, claiming the United States could save billions of dollars annually by using the muscle of the federal government — which is what he means when he says that Trump-as-president would be “making deals” with anyone — to negotiate against drug companies.

We don’t do it. Why? Because of the drug companies,” Trump told the crowd at one of his signature rallies last month in New Hampshire.

Whether all that is campaign trail bluster or actual policy that could be implemented by a future presidential administration won’t be known until 2017 at the earliest.

This year, however, voters in California are being given a chance to weigh-in directly on the issue.

A ballot measure in November will ask Golden State voters if they want to implement new government regulations intended to curb high drug prices by banning some government-run health insurance programs from buying drugs at higher prices than those paid by the federal government. Critics of the proposal say the intentions won’t align with reality, and voter approval of the initiative would result in drug shortages and further complications to a health care system already overwrought with regulatory burdens.

If approved, the ballot measure would prohibit some state agencies from entering into contracts for prescription drugs unless the contracted prices are the same or lower than the prices paid by the U. S. Department of Veterans Affairs. Advocates say the regulation will give government the upper-hand in setting drug prices, slowing their steady increase.

Groups such as the Pharmaceutical Research and Manufacturers of America, a trade association of drug companies, worry the regulations will hurt the development of new drugs — 7,000 of which are currently in the pipeline.  Prescription drugs are expensive, yes, but trying to lower those costs with government regulations can carry unintended consequences.

And the California initiative would only apply to certain state-run health insurance programs. For example, it would exclude some 10 million people enrolled in the managed care program run by MediCal, the state’s Medicaid program for the poor.

“It’s flawed in many ways,” Kathy Fairbanks, spokeswoman for PhRMA, told Watchdog. “We’re worried this initiative will end up raising drug prices, causing delays for patients and will cost taxpayers who will have to pay for the state to face litigation over how this would be implemented.”

Proponents of the new regulations have obtained enough signatures to get the measure on the ballot in November. California state law allows advocates to voluntarily withdraw ballot measures until June 30, but there is little reason to think they will do so.

The primary force behind the California ballot initiative is the AIDS Healthcare Foundation, a Los Angeles-based nonprofit.

“Our primary purpose here is to strengthen the hand of government in negotiating prices, and make clear the public ire over the cost of drugs and the lack of transparency, and that profit is an issue that has to be dealt with,” Michael Weinstein, co-founder and president of the AIDS Healthcare Foundation, told the San Jose Mercury-News.

It’s not just happening in California, though. A similar ballot measure could be considered by Ohio voters this November, and lawmakers in Massachusetts and Pennsylvania have drafted bills to create new government commissions to regulate the price of drugs. Those efforts are also backed by AHIP.

Voters and state lawmakers might buy into the promise of lower drug prices via government regulations. History and economics suggest price controls won’t be that simple, easy or consequence free.

“Regulating prescription drug prices stifles competition and will result in limited access to new and innovative treatments for patients as they seek care,” said Mia Heck, director of the health and human services task force at the American Legislative Exchange Council.

“This often leads to poorer health outcomes, lost productivity and a significant decrease in quality of life,” she said.

That’s not what you’ll hear from Sanders, Clinton or Trump. But that’s why savvy voters don’t believe every promise made on the campaign trail.

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Eric Boehm is the national regulatory reporter for Watchdog.org. He lives in St. Paul, Minnesota. His work has appeared in Reason Magazine, National Review Online, The Freeman Magazine, The Philadelphia Inquirer, The Washington Examiner and Fox News. He was once featured in a BuzzFeed listicle. Follow him on Twitter @EricBoehm87 and reach him at [email protected]