The Politically-Motivated Assault On Medical Innovation

Phil Kerpen | President, American Commitment

How do you survive politically when your party’s signature domestic policy achievement is failing to keep one of its central promises?  Pass the blame, preferably to an industry most Americans already dislike.

That’s precisely what Democrats are doing when it comes to the failure of Obamacare to contain costs. On their side are the insurance companies, hospitals, and pharmaceutical benefit managers that benefit from Obamacare who have organized under the banner of the National Coalition on Health Care (NCHC) and launched a sophisticated political campaign to scapegoat drug companies. If they succeed, not only will Democrats avoid political accountability for their bad law, but the stage will be set for expanding the intrusive power of government into the pharmaceutical sector with predictably disastrous consequences.

NCHC’s membership boasts a litany of corporate Obamacare beneficiaries like America’s Health Insurance Plans and the Blue Cross Blue Shield Association, as well as a laundry list of liberal constituencies from the AFL-CIO to the NAACP. Interestingly, the group is run out of the infamous 1825 K Street address that the Washington Post once described as “a clubhouse and clearinghouse for liberal causes. Its most prominent tenants form an abbreviated who’s who of well-funded allies of the Democratic Party.”

So the same core coalition that created and passed Obamacare has sprung into action to blast drug companies and shift the blame to them. To head the effort, they turned to John Rother, a former AARP top lobbyist who spearheaded AARP’s surprising support for Obamacare – despite the fact the group’s own members opposed the bill 14 to 1.

NCHC’s goal is not just to misdirect anger over Obamacare to help Democrats survive the 2016 elections. They intend to actually implement price controls that would pad the profits of their industry allies, but have a potentially devastating impact on the discovery of new cures.

Case in point, NCHC used last week’s hearing of the House Committee on Oversight and Government Reform on the obviously questionable pricing practices of Martin Shkreli’s Turing Pharmaceuticals to make the reckless claim: “Shkreli and Big Pharma’s price gouging are one and the same.”

Even Democratic members of Congress know that’s folly. Representative Stephen Lynch, for instance, told Turing’s CCO at the hearing: “You are trashing the pharmaceutical industry that is doing a great job on a lot of different drugs from organ transplants to cystic fibrosis.”

But while NCHC’s officially stated goal is simply “to capture the attention of the leaders of the biopharmaceutical industry and invite them to engage with us in a dialogue,” their activities are political: running ads, conducting polls, and hiring on-the-ground political operatives in the early primary and caucus states to blame higher health care costs on prescription drugs. In effect, although they claim to be bipartisan, it is clear that they are fueling Democratic efforts to scapegoat drug companies for the overall rising cost of health care and set the stage for some form of price controls.

That would be a disaster. As Milton Friedman and 100 of his distinguished peers explained: “Drug price controls are more difficult to remove than other price controls. Controls on oil and other products often tend to be limited or short-lived, as voters eventually object to the resulting shortages and distortions. The effects of drug price controls, however, are far more difficult to observe because they mainly affect medicines that haven’t been invented yet.”

Moreover, price controls will actually have a major negative impact on the federal fiscal outlook, because managing chronic diseases is much more expensive than preventing and curing them.

Instead, genuine health care reform must recognize that heavy government intervention in the health care sector is having a negative impact on affordability and replace Obamacare with real competition and choice, allowing the market to not only maintain, but improve incentives for developing new cures.

Phil Kerpen is president of American Commitment, a free market policy organization based in Washington, DC.

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