The Personal Option, Not Price Controls, is the Solution to High Drug Prices
Price controls for prescription drugs promise to do what everybody wants: bring down the cost of life-saving medications with no negative consequences – in other words, a free lunch.
But the reality is proving different, showing that what America needs isn’t more government bureaucracy meddling in your health care, but health care that empowers you — a true Personal Option.
The Latest Experiment in Drug Price Controls
The high cost of prescription drugs is a longstanding challenge in the American health care system, and the inflation throughout the economy is only amplifying the pain.
While government spending drove inflation higher, the Biden administration also sought to get government more involved in drug pricing as part of the the 2022 “Inflation Reduction Act.” That law made a number of ill-considered changes to drug pricing, most notably i empowering the government to set price caps on certain drugs — a government intrusion styled as “negotiation.”
But you can’t negotiate with a bear in the woods, and you can’t negotiate with the government — you just have to adapt to what the government dictates. And the results have been underwhelming.
The Results of Government Command
Price controls reduce the profit that companies can make from new drugs, leading to less investment, rationing, and shortages. The short-term impact for some individuals is lower prices, certainly, but the longer-term impact is doubly negative. Not only do companies have less incentive to invest in developing new treatments, but the new regulations and profit limits make it harder for others to compete, crippling the very forces that drive down prices.
Sure enough, the negative effects of price controls quickly reared their head. Even before the law was implemented, observers noted that companies were rolling back their research and development investments, meaning fewer life-saving drugs in the coming years. Ironically, instead of reducing prices, the new law encouraged companies to set higher prices right out of the gate.
What’s more, a report from late last year noted the potential for the law’s incentives to drive up private insurance premiums, making health care even less affordable for many.
Price controls are failing. We need a better way.
Reforms for Lasting Change
A number of reforms would lower drug prices without the negative side-effects of price controls.
- Streamline the government’s drug-approval process without sacrificing safety. It can cost over $2 billion to develop a new drug. A faster, more efficient process for approving new medications would bring down the cost to develop new drugs, allowing prices to fall. And drugs approved as safe and effective overseas by countries we trust should receive automatic approval here in the United States, instead of having to undergo yet another years-long testing process.
- Strengthen generic drug competition. The fastest route to lower drug prices is competition, and the widespread success of generic drugs and biologics demonstrates that reality. Pharmaceutical companies know this and so engage in anticompetitive behavior to stop generics from coming to market. They also game the system to prolong their government-granted patent monopolies. Reform could stop these behaviors and force companies to compete.
- Give consumers tax-free savings to pay for health care. Because of government rules, only 10% of Americans have access to a Health Savings Account. Allowing more Americans to control what they are spending on their health care, particularly if paired with greater price transparency, would drive down costs across the system, including for prescription drugs.
The Solution: A Personal Option
Americans can’t afford government price controls. You should be in charge, not the government. A Personal Option would bring you the medications you need at prices you can afford.
