On Thursday, Senator Bernie Sanders will hold a hearing to investigate why the United States pays, “by far, the highest prices in the world for prescription drugs.”
It’s a valid — albeit leading — question that points to a very real problem. But the answer, and the policy solution, is very different from what the socialist senator believes.
Brand-name drugs do typically cost more in America than in other developed countries. High pharmacy bills are a reality for too many Americans, who are already struggling to balance their household budgets thanks to the unprecedented inflation caused by President Joe Biden and congressional Democrats’ spendthrift policies.
Bernie and others on the left invariably argue that the solution is to impose price controls on prescription drugs in order to bring U.S. prices down to the level of other advanced countries. Canada and most European countries have partly or fully socialized healthcare systems that already impose price controls.
But there’s no such thing as a free lunch. Price controls come with serious drawbacks.
Just consider Europe, which was once the leader in pharmaceutical research and development, producing more than half of all new medicines worldwide in the 1970s.
Since then, European counties and the EU have increasingly imposed price controls on medicines, strangling its research sector. The United States and its comparatively free-market healthcare system quickly surpassed the continent. The gap between EU and U.S. investment into pharmaceutical R&D has increased more than ten-fold in just 20 years, according to Nathalie Moll, Director General of the European Federation of Pharmaceutical Industries and Associations.
Europe’s share of production of new medicines has dropped to just 20 percent of the global market, while America now produces well over half of all new medicines.
That decline in research and manufacturing was obviously awful for European workers — and it’d be similarly disastrous for Americans if we copied those socialist policies. The nearly five million U.S. jobs the biopharmaceutical industry supports would be at risk.
Even more importantly, Americans’ health would suffer.
Americans enjoy much better — and faster — access to newly developed drugs that save and improve lives.
A recent report from the liberal Commonwealth Fund unintentionally illustrates the consequences of price controls. The report examined the international prices and availability of the first 10 drugs that’ll be subject to price caps under the Inflation Reduction Act.
While these drugs cost less in five major European nations, Australia, and Japan, they were also less available to patients in those countries. Americans had access to those medicines a year and a half earlier, on average, than patients in countries where the drugs were already subject to price controls.
And delayed access is actually the best-case scenario for foreign patients. Often, they never gain access, because their government-run health systems refuse to cover new medicines at all. Americans have access to 85 percent of new medicines launched anywhere in the world, while patients in the twenty developed nations that make up the G20 have access to just 38 percent, on average.
Price controls and government bureaucracy are not the right path forward. Europe’s statist approach to everything from medicines to clothes dryers is largely the reason why Europeans are so much poorer than the average American. GDP per capita exceeds $76,300 in the United States, while it’s just $56,400 in Sweden, $48,700 in Germany, $46,100 in the United Kingdom, and $40,900 in France, according to World Bank data.
You read that right. The average American earns almost twice as much as the average Frenchman.
But just because Americans are much better off than Europeans trapped in failing, quasi-socialist countries doesn’t mean that millions of us aren’t struggling to afford their medicines or that we should simply throw our hands in the air and lament that nothing can be done.
Just the opposite.
Lawmakers should channel the power of the free market to help drive down drug prices and bring Americans relief from the unprecedented inflation caused by President Biden’s disastrous policies.
The entire drug supply chain is ludicrously bloated. According to one report, middlemen known as prescription benefit managers control 80 percent of all prescriptions, and they’ve used that power to double their fees over the last five years. The same report found that “[r]ebates and fees received by PBMs account for 42 percent of every dollar spent on brand medicines in the commercial market.”
Attacking PBMs for their role in inflating drug costs should be a political slam dunk. Yet Democrats left PBMs virtually untouched in their dubiously named Inflation Reduction Act.
Likewise, Congress could reform regulatory agencies like the FDA, so that drugs are reviewed and — when appropriate — approved faster, which would help drive down prices through competition.
Additionally, policymakers in both the legislative and executive branches could pressure other nations to start paying their fair share, so that Americans don’t have to shoulder a disproportionate burden of the globe’s research and development. Price controls abroad are unfair, at odds with our trade agreements, and take advantage of American consumers.
The United States’ capability to develop and manufacture lifesaving drugs is the envy of the world and continues to benefit tens of millions of Americans. Forcing European-style price controls on these medicines would only make Americans sicker and poorer. There are better ways to help Americans afford the medicines they need.
Drew Johnson is a Republican candidate for Congress in Nevada’s third congressional district. He has spent more than 25 years as a policy analyst and government watchdog at many of America’s leading free market think tanks and conservative media outlets.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller.