Flirting with Rx Disaster
 
Bringing a medication to market is no easy task and can cost upward of $2 billion and take more than a decade. If lawmakers get their way, though, it could soon become next-to-impossible to supply Americans with life-saving cures. The Democrats’ healthcare reconciliation bill contains a provision empowering the secretary of Health and Human Services (HHS) to target medications for Medicare “negotiations.”  Only a few drugs would be subject to the rules at first, but the negotiation list would grow by the end of the decade.  Despite the best efforts of lawmakers to spin these drug pricing provisions, Medicare “negotiation” is little more than price controls aimed at the most innovative drugs on the market. And as has been experienced elsewhere in the healthcare market, federal price tinkering is a recipe for disaster. Congress needs to reverse course on this disastrous proposal and focus on reforming the drug approval process to lower costs.  Like many goods and services across the healthcare sector, drug prices have climbed and remained stubbornly high. Roughly half of Americans cite cost barriers as a real problem hampering access to care. To understand the impact of price controls, though, it helps to understand why prices are at their current level. 
 
Putting a new medication through the Food and Drug Administration’s (FDA) approval process is a multi-year process that requires large, costly studies. Regulators at the FDA have rejected medications with promising initial results if the statistical significance doesn’t quite match the agency’s exacting standards – even if the drug is more likely than not to save lives.  The cost of agency risk aversion is high. Only medications with sky-high testing budgets can get through regulatory hurdles, and these budgets are passed onto consumers via high prices. Medicare “negotiation” may lead to lower prices on paper, but not without dire long-term consequences. If drug manufacturers perceive that they cannot recoup the multi-billion-dollar costs of medication research and development, the innovation pipeline will dry up. And that’s no small issue, given that the U.S. population is rapidly aging, and the number of cancer cases is slated to increase 50 percent over the next few decades. This historic challenge will require game-changing medications and responsive reimbursement policies.
 
Policymakers argue that HHS regulators will be able to keenly identify the right drugs for negotiation and avoid setting prices too low. But, Medicare price-setting already takes place for a variety of healthcare goods and services, and the results are not promising. Currently, the Centers for Medicare and Medicaid Services (CMS; part of HHS) is in the middle of proposing changes to its “Physician Fee Schedule,” which dictates how healthcare services are reimbursed by the federal government. At the start of the pandemic, CMS reasonably loosened rules on telehealth reimbursement policies, allowing physician “direct supervision” to take place virtually instead of in-person. This not only made sense for the COVID-19 crisis, but also saved physicians and patients time and money.  The American people deserve a drug approval and reimbursement process that balances cost, safety, and innovation.
 
Postal Increases
 
On July 10, the USPS increased postage for a 1-ounce letter from 58 cents to 60 cents. Stamp prices were also increased last August (from 55 cents to 58 cents) as part of Postmaster General Louis DeJoy’s 10-year plan to improve the beleaguered agency’s finances. DeJoy also indicated during a Board of Governors meeting this past May that further price hikes would be necessary to reduce the USPS’ large operating losses. America’s mail carrier has lost more than $90 billion over the past fifteen years. Households across the country are feeling the pain of out-of-control inflation. Prices on everything from groceries to gasoline are far too high thanks to skewed spending priorities in Washington, D.C. Now, Americans will have yet another expense to worry about thanks to irresponsible postal leadership. A two cent increase here and a three cent increase there may not seem like much, but these costs add up fast when millions of Americans are living from paycheck to paycheck. Postal leadership needs to think twice before bilking struggling households to pay for a bloated logistics network and overstaffed bureaucracy.
 
Postal leadership claims that these price hikes are reasonable because they are lower than reported inflation rates. This assessment conveniently leaves out the USPS’ plan to reduce service and lengthen delivery times across the country. The agency has been busy slowing down roughly 40 percent of first-class mail, making it more difficult for Americans to rely on two and three-to-five-day delivery turnarounds. The plan has moved forward despite concerns raised by consumers and the Postal Regulatory Commission. It is beyond absurd to ask families to pay more for reduced services, while doing next to nothing to keep staff and procurement costs under control.
 
There are plenty of ways to get the USPS back into the black. The agency can and should take a closer look at package pricing, given credible concerns that first-class letter postage is subsidizing parcel deliveries. The agency should also steer away from electric fleet purchases. Overcharging millions of consumers for worse service is not the answer.

BLOGS:

Monday: Democrats’ drug pricing deal is the wrong remedy

Tuesday: Watchdog Group Responds to Reports of $30B F-35 Jet Deal

Wednesday: Copyright Claims Board Is A Boon To Innovation

Thursday: Op-Ed: Mandating Drug Price Controls Is Flirting With Disaster

Friday: Op-Ed: The SEC’s Climate Mission Creep Will Be Very Costly
 

MEDIA:
 
July 14, 2022: National Review ran TPA’s op-ed, “Online Anti-Tech Push Exposes Antitrust Hypocrisy.”
 
July 18, 2022: WBFF Fox45 (Baltimore, Md.) interviewed me about IRS tax preparation. 
 
July 18, 2022: The Center Square ran TPA’s op-ed, “Democrats’ drug pricing deal is the wrong remedy.”
 
July 20, 2022: Issues & Insights ran TPA’s op-ed, “Copyright Claims Board Is A Boon To Innovation.”
 
July 21, 2022:  Townhall.com ran TPA’s op-ed, “Mandating Drug Price Controls Is Flirting With Disaster.”
 
July 21, 2022: The Center Square ran TPA’s op-ed, “Op-Ed: Price hikes, Medicare debt won’t deliver postal reform.”
 
July 21, 2022: WBFF Fox45 (Baltimore, Md.) interviewed me about drug pricing.
 
July 21, 2022:  I appeared on WBOB 600 AM (Jacksonville, Fla.) to talk about the Supreme Court and the housing market.
 
July 22, 2022: Real Clear Markets ran TPA’s op-ed, “The SEC's Climate Mission Creep Will Be Very Costly.”
 

 

Have a great weekend!