It seems that every new Congress inevitably comes under pressure to cap prescription drug prices. This time it’s the National Coalition on Health Care and its “Campaign for Sustainable Rx Pricing” that’s calling on Congress to beat back “the skyrocketing cost of prescription medicines.”
The talking points on prescription drug costs have been regurgitated so often for so long it’s easy for the media to accept them as fact. However, if you look at national healthcare spending in 2013, prescription drug prices accounted for just 9.3 percent of the total cost – a percentage that has “not increased substantially in recent years,” according to a Health Affairs report titled, “National Health Spending in 2013: Growth Slows, Remains In Step With The Overall Economy.”
A pie chart provided to the Washington Post by the CMS Office of the Actuary shows a sliver titled, “Prescription Drugs” to be even smaller than “Other,” a general category of miscellaneous spending and only slightly larger than “Dental Services and Other Professionals.”
“Prescription drug spending, which accounts for almost one in every 10 dollars spent on health care, saw modest spending growth after being pretty flat in 2012,” reported Jason Millman for the Post.
Moreover, the prescription drugs that price-control advocates lately point to as examples of excess – namely, specialty drugs that cure and manage cancer, multiple sclerosis and other degenerative disease – account for less than a third of prescription drug spending. Understand that this narrow category of drugs can actually cure diseases such as Hepatitis C, not just treat their symptoms.
So, is America really at risk of runaway prescription drug prices?
No. Between 2012 and 2013, year-over-year growth in spending on prescription drugs was 2.5 percent, while hospital care, medical equipment and miscellaneous professional services grew above 4 percent. That’s all while 2013 saw more new drug launches than any of the prior 10 years.
So, to recap: in 2013, there were more new, non-generic drugs launched than any of the prior 10 years, yet the overall spending on prescription drugs rose at a rate well below the rate that overall healthcare spending increased.
Yet at the onset of the 113th Congress, there are renewed calls for price controls. It’s easy for proponents of government intervention to point to a $1,000 pill, but let’s not forget what happened the last time that Congress intervened to “bend the cost curve down” in healthcare. Premium increases ranged from up to 38 percent for 63-year-olds to 78 percent for 23-year-olds; millions of Americans received cancellation letters from their health insurance providers. Oh, and they inserted the IRS into personal healthcare decisions.
Now the same folks who brought us Obamacare are sensationalizing prescription drug costs. The narrative is sexy, but the facts don’t justify the screaming headlines or outraged Tweets.
Healthcare spending is on the rise, but prescription drug prices are among the least of our concerns. Prices aren’t skyrocketing. At the same time, innovation is very much alive, and we have the free market to thank for that. As it has for decades, Congress should ignore sensationalism and continue to reject government-imposed price controls on life-saving prescription drugs.
Stephen DeMaura is the president of Americans for Job Security.