Democratic front-runner Sec. Hillary Clinton has a plan to deal with the cost of prescription drugs. As with most things, there is both good and bad in her plan.
Starting with the bad, Clinton intends to place a $250 monthly cap on prescription drugs, meaning she would adjust the current mandate in Obamacare and require insurance companies limit the amount of money someone must spend each month on prescription drugs.
From her website:
Her plan will demand a stop to excessive profiteering and marketing by denying tax breaks for direct-to-consumer advertising and demanding that drug companies invest in R&D in exchange for taxpayer support – rather than marketing or excessive profits.
First off, let’s address the fact that there’s no such thing as excessive profiteering in a free market. If you don’t know what profiteering is, it’s commonly defined as making an excessive or unfair profit.
How can a person make an unfair profit in a free market? It isn’t possible. There’s no force involved.
People might not like the price of something, but that doesn’t mean anything is “excessive” or “unfair.” If people are paying it, it is the market value. If the producer of a product, like a drug, is making a huge profit, what affect does that have on the market? It encourages other producers to get into the same market so they can also make money. This competition is a response to demand. People demand the drug and are willing to pay a certain price for it. Seeing the demand, suppliers respond.
Then, with the increased supply to meet demand, the price lowers. It’s basic economics.
The problem is, America doesn’t have a free market health care system. Right now, government is so involved in every aspect of health care, the prices for products and services are completely out of whack. Hillary’s plan to fix the problems created by government is to use more government.
That’s not going to work, unless the goal is to make things so bad that single payer healthcare looks appealing.
In the same quote above, there is some good. Demanding drug companies invest in R&D in exchange for taxpayer support is good. Not because government should mandate how a company spends it’s money, but because any amount of pain that is attached to the money looted from the Treasury is a net positive. Companies need to feel a sense of loss of control for every penny they receive from the government. The more they take, the more control they lose.
Maybe that’s the only way to curb the corporate looting of the American people.
Another suggestion Clinton is making is using federal government’s purchasing power to negotiate down the price of prescription drugs. Negotiate is an interesting choice of words. Here’s how it goes down. The government wants to pay X. The company wants Y.
They “negotiate” and eventually we the people get the short end of the stick, either in fewer drugs to choose from because drug companies don’t have revenue for R&D or because certain procedures aren’t provided due to the government punishing a corporation who doesn’t play ball. Meanwhile, Medicaid is breaking the backs of doctors, flooding their practices with patients and have minimal effect on emergency room visits.
How will more of that help lower the price of prescription drugs?
But Hillary knows another solution. Import drugs from foreign countries, another bad idea.
Do you know why drugs are cheaper in foreign countries? They do not respect patent laws and threaten companies with outright theft of their product. If they don’t sell for cheap, the governments steal the patent and make the drug themselves, saving millions in R&D. If they do agree to the price, companies are then forced to find a replacement for that lost revenue. That’s one of many reasons our prices are so high.
Imagine what will happen if India fails to respect the intellectual property of a drug company, steals their formula and starts manufacturing their drug.
Why would any company invest billions of dollars in research if they are denied the opportunity to recoup their money?
This discourages innovation. The only reason they continue is the possibility of earning a profit by charging Americans more. Sad, but that’s the state of things.
So if we simply import cheaper drugs from countries that strong arm drug companies, denying the same companies the opportunity to earn a profit, are we not doing the same thing? Are we not capitalizing on the use of force to steal?
The solution isn’t in using force against American based drug companies, but in demanding an end to the practice of patent theft. It’s kind of a collective solution, when you really think about it. Instead of one country, or a few, bearing the burden of paying for new innovations, every country should.
So much of Clinton’s plan is based in class warfare and populism instead of economics and reality. It’s difficult to see it doing anything but making things worse. Instead of pointing government at American drug companies, maybe we should think about using government to protect their rights. In fact, perhaps government should be limited to that role entirely.