Setting drug prices is not a conservative policy

Writer PJ O’Rourke said, “If you think health care is too expensive now, wait until you see what it costs when it was free.”

Politicians claim we have high health care costs and prescription drug prices, and then point out that government price controls would bring costs down. Some politicians jumped on the price-setting train.

The truth is that government price controls do more harm than good. And government price controls are not conservative ideas.

Price controls run counter to conservative, free market principles and property rights. Milton Friedman, Friedrich Hayek, Henry Hazlitt, Adam Smith, Thomas Sowell, Ludwig von Mises, and other free market economists advocated economic freedom for individuals and firms, unimpeded by government price controls and other private market interventions.

These conservative economic principles are not anti-government. Good government provides rule of law, respect for private property rights, equal justice, impartiality, due process etc. These founding principles enable economic freedom while reining in bad actors.

Let’s be clear about what price controls are: government price fixing. It is illegal in itself if a private firm engages in price fixing because it is anti-competitive.

When the government sets prices, bureaucrats set health care policy through budget constraints. Direct government “negotiations,” favored by Senator Elizabeth Warren, Senator Bernie Sanders and other lawmakers, amount to a “take it or leave it” proposal for private innovative companies. This leads to problems with access and coverage for patients, while innovation is interrupted.

In some cases, these restrictions import the fixed prices of foreign government-controlled health systems. Reference pricing relates US prices to prices set by governments in foreign countries. Reference pricing essentially allows other countries to determine the value of our nation’s medical goods and services.

Price controls lead to predictable damage. Economist Thomas Sowell explains: “Whenever and wherever government controls were put in place to lower prices, the most common result has been a decrease in quantity supplied.”

Price controls drive up demand – artificially low prices hurt citizens more than they help because their government doesn’t buy enough medical goods for all patients who need this product.

Price controls reduce supply – government rations reach what is available because artificial prices below market discourage production.

Rationing access to government fixed-price drugs in Canadian, European, and other government health systems means that budget-driven bureaucrats delay or refuse medical care that can treat, treat or protect patients in need. Canadians wait an average of 22.6 weeks from seeing their primary care doctor to seeing a specialist.

The harshness that price controls instill as a policy involve making rationing decisions on the basis of Quality Adjusted Life Years, or QALYs. In English, this means that if you are too old, too young, or too sick, you literally “fall dead”.

Then there is the “relative effectiveness” scam. This translates to, if a drug is already available for a condition or disease, the new drug must be at a comparable price and provide clinical results that will impress you. Too often, bureaucrats manipulate clinical data to get the results they want for budgetary reasons.

Hazlitt expands on price controls: “Profit margins are reduced or eliminated. Marginal producers are thrown out of business. Even the most efficient producers may be required to turn their products at a loss.” Foreign bureaucrats are responding to the negative consequences of their price controls with “adoption.”[ing] Various other devices and controls”.

With medical innovations such as drugs and medical technology, pricing has treated new innovations as if they were mere commodities.

Pricing by the government may reduce spending in the short term, but it reduces innovation that produces new diagnoses, treatments, and treatments. It pushes innovators away and deprives them of the R&D funding necessary for future discoveries and medical breakthroughs.

Whatever flaws there are in the US health system, government price controls are a “cure” worse than disease.

Price control regimes strain the property rights of private producers. They reduce market-based choice and competition for consumers. It limits innovation, quality and value. This socialism has a very high price.

• James Edwards, Ph.D., is Executive Director of the Conservative Party for Equity (@4PropertyRights) and patent policy advisor to the Eagle Forum for Education and Legal Defense. The opinions expressed are his own.