Republicans Get Pharmaceutical Policy Wrong

Jose Nino Comments

In Washington, D.C., it’s becoming clear that both parties do not believe in authentic free market policies.

This is most apparent when dealing with healthcare. Even supposed “pro-market” Republicans are falling for interventionist traps such as price controls. Daniel Savickas the Regulatory Policy Manager of Freedomworks called attention to how Republicans have done a lousy job regarding pharmaceutical pricing policy.

Last year, Iowa Senator Chuck Grassley correctly teamed up with other conservative leaders to rally against the international pricing index (IPI) proposal from the Trump administration. The policy would have mandated price controls on prescription medicine in the U.S. in accordance with their listed prices in foreign countries.

Grassley was correct in noting how Trump’s original plan would have been detrimental toward research and development. R&D is a crucial process in the creation of new drugs that can potentially bring cures to the market.

Grassley countered with his own bill, which ironically contained its own form of price controls. Under Grassley’s proposal, a stiff tax would be slapped on pharmaceutical companies that hike their prices above the rate of inflation. This type of proposal does not make any economic sense because companies often shoulder certain costs or face unforeseen economic restraints that require them to raise prices. For a politician hailing from a party that claims to be in favor of limited government, Grassley’s plan to have the government intervene in the price system completely contradicts the notion.

Such a tax would not only hinder the ability of companies to bring drugs to the market but these taxes — just like the majority of taxes on goods — would ultimately be passed on to consumers. In sum, everyone’s standard of living drops in this equation. Some of these matters really boil down to the basics. The price system will never go away no matter how hard legislators try to defy the iron laws of economics.

When price controls are imposed from above, shortages ensue thanks to the high demand that is not met with a corresponding increase in supply. This has been clear throughout various shortage episodes in the last half-century, from the United States in the 70s regarding gas shortages to Venezuela’s widespread shortage of basic goods today.

With how radicalized healthcare discussions have become these days, a real, market alternative is desperately needed. On one hand, you have calls for tighter price controls on drugs from the likes of establishment Democrats such as House Speaker Nancy Pelosi. On the other hand, candidates like Bernie Sanders are calling for a single-payer healthcare system. None of these options will do much to improve healthcare outcomes in America, but they will assuredly grow the size of government. In fact, they may worsen the quality and accessibility of healthcare.

The very least Republicans can do as an opposition party is to propose legislation that actually reduces the government’s presence in the healthcare system and drug markets. Agencies like the Food and Drug Administration (FDA) are notorious for delaying the arrival of life-saving drugs thanks to all the regulatory hoops put in place.

Challenging the role of this soulless bureaucracy would not only galvanize the public but also improve the overall drug market by making it more affordable and accessible to the public. Instead, Republicans opt for a moderate form of interventionism, which makes for good politics in the short term.

However, this does not end well in the long term, since the government has a tendency to grow. This has been the story of the last century and it will likely not end until a political movement offers a solution that rolls back the state and lets the market and civil society provide healthcare solutions.

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