The Trump administration recently announced its support for a bipartisan bill that would help curb prescription drug prices. The Prescription Drug Pricing Reduction Act—introduced by Senators Chuck Grassley, R-IA, and Ron Wyden, D-OR—would shield vulnerable senior communities on Medicare from rising drug costs and penalize pharmaceutical corporations for price gouging. In the past few years, pharmaceutical behemoths, facing little competition, doubled, tripled, and quadrupled the price of their prescription drugs.
Insulin, which millions of diabetics can’t live without, has more than doubled in price in a span of only four years. Yet, it’s been on the market for nearly a hundred years—but still remains one of the most expensive common drugs on the market. We know that when a product has been on the market for a long time, it usually drops in price. For example, today, one can find a 2012 iPhone for under $100. But while prices for a 2012 iPhone have dropped since its release, insulin prices have risen since then. Many diabetics, unable to pay nearly $6,000 annually for insulin, are now forced to skip and ration their required doses.
This all begs the question: why is the price of insulin continuing the climb?
In part, it has to do with the lack of competition. In the case of the iPhone, Apple has to compete with products by Google, Samsung, LG, HTC, and a roster of other phone companies. On the other hand, only three companies own 90 percent of the insulin market. And these companies do not seem interested in competing against one another; in fact, they seem to raise their prices at around the same time, leaving diabetics with hardly any options for cheaper alternatives. Does this sound like a free market?
Diabetics don’t think so—and neither does Congress.
The Prescription Drug Pricing Reduction Act (PDPRA) would penalize insulin manufacturers and other pharmaceutical manufacturers that raise their prices faster than the rate of inflation. In other words, companies with little competition would have an incentive to not hike their prices. Otherwise, what would stop monopolistic pharmaceutical companies from price gouging?
Many people are hesitant about government intervention in the marketplace. But Medicare isn’t the marketplace; it is a program through which the government effectively subsidizes pharmaceutical companies. Medicare is the pharmaceutical industry’s second-largest customer, spending $126 billion on prescription drugs in only one year.
And, as drug prices rise, taxpayers will be footing even higher bills. This bill would not impose “price controls,” as pharmaceutical companies would remain free to charge whatever they want in the private market. What this bill does is impose a cap on the growth in taxpayer subsidies to pharmaceutical companies. In total, the PDPRA’s measures would save taxpayers over $100 billion dollars.
Since President Theodore Roosevelt, the Republican Party has had a long history of restoring freedom, fairness, and competition in the marketplace by prudently using laws to end crony capitalism and corporate welfare. Senator Chuck Grassley has followed that tradition—and I hope other Republican senators who care about truly free and fair markets who are key conservative voices in Washington, like Senator Thom Tillis, Joni Ernst, and Cory Gardner, and Senator Martha McSally in my home state of Arizona will support this important bill.
Americans want their lawmakers to pass legislation that curbs prescription drug prices. A poll found that eight in ten voters think Congress should take action to lower drug costs. The PDPRA would ensure that Americans can afford their needed prescriptions.
Written by Anthony Kern at realclearhealth.com