Cybersecurity Awareness Month 
 
October is Cybersecurity Awareness Month.  It’s fitting the month is shared with Halloween as American’s devices and national security are under threat from haunting hackers and spooky foreign adversaries. Congress continues to drop the ball and not make cybersecurity a priority. Politicians too often ignore cybersecurity concerns that conflict with their policy desires with antitrust legislation like the Open App Markets Act and American Innovation and Choice Online Act haunting Capitol Hill. These bills continue to be reintroduced despite spooky cybersecurity implications and resounding opposition to weakening America’s global technology dominance. TPA urges lawmakers to put cybersecurity above politics as American devices, companies, and information is increasingly targeted.
 
The importance of cybersecurity cannot be overstated.  Critical systems are always under attack from criminals and rogue nations.  Cybersecurity Awareness Month shows that actions speak louder than words.  Unfortunately, many in Washington continue to only pay lip service towards cybersecurity. The Biden administration and members of Congress on both sides of the aisle continue to pursue policies that will harm private companies’ abilities to protect their consumers. From the new push for so-called “net neutrality” rules to antitrust proposals such as the Open App Markets Act, there is a common thread of policymakers seeking to micromanage companies’ networks and services. While many assume stringent regulation should reduce consumer harms, the opposite is too often the truth. Inhibiting the abilities of companies to manage their product and service offerings the way they see fit, either through intense scrutiny or outright directives, will reduce proactive measures to keep consumers’ devices and data secure. If tightening cybersecurity practices at the margins invites intense regulatory headaches, companies will be dissuaded from doing beyond the bare minimum.
 
Case in point: a cyberattack last month caused MGM Hotels & Casinos to shutter operations at more than a dozen locations, plausibly costing the company up to $8.4 million per day. Days later, Caesars Entertainment notified  the Securities and Exchange Commission that it paid hackers roughly $15 million in ransom money after a recent data breach.  These Las Vegas casinos join a prestigious group of entities that have this year suffered from cybercrime. This group includes multiple federal entities, healthcare facilities, state governments, local school systems, prestigious universities, and leading corporations such as Shell Global and Sony.  Policy makers ought to recognize that even the most highly resourced organizations, with the strongest incentives to maintain robust security, cannot maintain perfect cybersecurity. No government, company, or cybersecurity expert can eliminate human error, the security weakness hackers exploit most often. Indeed, in the Caesars breach, “Hackers used a social-engineering scheme, in which a person pretending to be an employee contacted the company IT help desk to have a password changed, according to people familiar with the matter,” the WSJ relates.
 
Technology and cybersecurity companies, fully aware of this fallibility, innovate continuously to minimize the probability of – and damage done by – operator errors. In the personal-device industry, Apple has tied its marketing and brand image to high levels of cybersecurity. While iOS devices provide the user less flexibility than Android devices do, they fall victim to malware at significantly lower rates – a satisfactory tradeoff for many. Consumers historically have preferred more closed platforms that streamline or make safer the user experience, and many happily choose the relative security Apple products offer. Politicians and bureaucrats too often ignore many cybersecurity concerns that conflict with their other policy desires. These leaders should re-review the ever-increasing threats Chinese, Russian, and private hackers pose and accordingly reorient their priorities.
 
 
 Dangerous Drug Price Controls
 
Some believe that government first emerged from the practices of bandits who, tired of marauding, settled down and established dominion over a single locality’s inhabitants. These newly stationary bandits demanded from their subjects taxes and fealty in exchange for protection — or so the theory goes. Some days, modern governments seem scarcely to have changed from this nascent state. The Inflation Reduction Act (IRA) empowered the Department of Health and Human Services (HHS) to impose de facto price controls on prescription drugs provided through Medicare. President Joe Biden ’s administration announced the first 10 covered drugs last week. This program, which weds petty tyranny with grand larceny, fails on economic, public health, and constitutional grounds. The IRA, which did nothing to curb inflation, seems misinformed of many ordinary words’ meanings. It says Medicare will “negotiate” drug prices with manufacturers. But the process involves “negotiation” only in the sense that an armed mugger “negotiates” for his victim’s wallet. Companies cannot contest the prices HHS will unilaterally set, and the IRA explicitly insulates the agency’s determinations from judicial and administrative review. The IRA requires HHS to demand at minimum a 25%–60% discount from market rates, and it encourages the agency to gouge even deeper. Moreover, officials may make these determinations arbitrarily — and without soliciting public comment.
 
Should firms balk, they must either remove all their products from Medicare (Parts B and D) and Medicaid or submit to a so-called “excise tax.” The former option constitutes an economic impossibility for drug companies  and a potential medical crisis for their patients. Washington has acquired ineluctable market power. Medicare Part D and Medicaid patients amount to nearly half of American prescription drug spending, and drug companies cannot afford to boycott its markets. “Excise tax” is another misleading label since this charge functions less as a tax than as a punitive deterrent. According to the Congressional Research Service, “The excise tax rate would range from 185.71% to 1,900% of the selected drug’s price depending on the duration of noncompliance.”  The Congressional Budget Office and the Joint Committee on Taxation estimate the tax would generate no revenue — for no drug company could ever pay so excessive a penalty. Thus, the federal government has barricaded the pharmaceutical industry’s escape at both front and back doors. While populist politicians and commentators enjoy decrying “Big Pharma,” “corporate greed,” “price gouging,” and the like, high drug prices in fact stem largely from high development costs. Stifling, risk-averse federal drug-approval regimes have foisted vast monetary and paperwork burdens on would-be innovators. However, rather than deregulating to lower the costs it imprudently imposed, the federal government now seeks to strip drug companies of their financial incentive to innovate.
 
On average, developing a single drug requires more than $2 billion and 10 to 15 years of research and clinical trials. Of compounds that begin preclinical testing, 99.98% fail to gain the Food and Drug Administration’s approval. Pharmaceutical companies must maintain 62.2% margins on successful products to average a 4.8% overall rate of return, according to a 2018 CBO report. The Biden administration’s efforts to slash prescription drug prices, though not their production costs, alter none of these underlying economic conditions. Basic economics says that when a product’s production costs rise and its sales revenues fall, firms will produce less of it. By excising manufacturers’ incentive to produce, price controls lead invariably to stunted innovation, worse product quality, and supply shortages. The pharmaceutical industry has no special immunity from this basic economic phenomenon.
 
Biden’s price fixing will slow pharmaceutical investment, delaying Americans’ access to life-saving treatments. Indeed, a meta-analysis from the Information Technology and Innovation Foundation reports, “Academic studies consistently show that a reduction in current drug revenues leads to a fall in future research and the number of new drug discoveries.” Manhandling markets and distorting prices seldom produce the economic benefits technocrats promise. The IRA has joined such economic illiteracy with obfuscatory language and constitutional violations. The law’s pharmaceutical price-fixing deserves to meet its doom in court.