Christian
Josi | Posted: Jul 30, 2020 11:09 AM The opinions expressed by columnists are their
own and do not necessarily represent the views of Townhall.com.
There seems to be a renewed push for the United States to
copy the socialist health care model of Europe with regard to health care
pricing. Importing socialism from nations like Germany would be a mistake
because it will destroy the market forces that have made the United States the
economic and innovation leader of the world. With all the flaws we have in the
American health care system, more government interference will not make things
better – it will make the system worse.
Two troubling signs have emerged that liberal-leaning Trump
Administration officials are trying to get President Donald J. Trump to issue
an executive order imposing the International Price Index (IPI) in health
care. The Hill reported
on July 21, 2020, “The White House is considering one or more executive orders
aimed at lowering drug prices that could come as soon as this week” and “one
idea under discussion, sources say, is to link some U.S. drug prices to the
lower prices paid overseas, an idea that is opposed by many Republicans, who
see it as a price control that violates free-market principles.” In January of
this year, a coalition of 52 right-leaning organizations sent a letter to
Department of Health and Human Services (HHS) Secretary Alex Azar arguing
“conservatives have long opposed price controls because they utilize government
power to forcefully lower costs in a way that distorts the economically
efficient behavior and natural incentives created by the free market.” Price
controls under the guise of indexing would get away from the market-based
approach and would impose socialism in drug pricing.
Opposition to this horrible idea on the right is
strong. Adam Brandon of
FreedomWorks argued in Real Clear Markets, “last year, some supposedly
conservative lawmakers” endorsed “price controls on prescription drugs” and
“this proposal, known as the international price index (IPI), would tie the
prices of Medicare drugs in the U.S. to prices in a select set of foreign
nations.” Brandon describes the process as “certain Medicare drugs would have
been tied to a basket of foreign nations, with the ‘proper’ price being
formulated based on the prices in those nations.” He correctly describes this
as “central planning on steroids,” because the U.S would have stringent price
controls. There is no way to spin this as a good idea.
Politico reported
on a new study from Health Affairs pointing
to Germany as a model for socialist price controls on drug prices. As
reported, the study used “data on 57 cancer drugs launched in Germany from 2002
to 2017, the Harvard researchers found that a 2011 German law to allow for drug
price negotiations was associated with aligning prices more closely with
clinical benefit, Zachary writes.” Prices went down by 24.5% relative to the
initial launch prices. The idea of the “clinical benefit” of drugs is
wholly arbitrary because it relies on opinions, not any market-based pricing
structure.
The United States is not going to copy the German model of a
top-down approach to setting prices. The German health care model is
government-run socialism and using the German model for drug prices might lead
the U.S. down the path of socialized medicine if Republicans don’t get smart on
this. It should not surprise anyone that German patients, because of their
system, don’t have access to important treatments and new drugs, because
government bureaucrats have made bad decisions for consumers. It should
not be a surprise that the German government appointed price-fixing
organizations that make determinations on what drugs benefit and what drugs
don’t get it wrong with new treatments and German consumers pay with limited
access to life-saving drugs.
The bottom line is that the Trump Administration should not
be adopting socialism and European style price controls because that will hurt
patient access, doctor-patient determinations on drug choice, and give too much
power to government bureaucrats. Implementing the International Price Index in
Medicare is a first step towards the dream of Rep. Alexandria Ocasio-Cortez and
her squad to implement a 100% socialist health care system for all Americans.
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