OPINION: Market Competition, Not Price Controls, Has Proven To Lower Drug Costs for Medicare
President Trump has proven to be an astute negotiator on behalf of working men and women, particularly regarding unbalanced trade deals disfavoring America. He has already renegotiated NAFTA into a better deal for America’s working people.
Now he has China on the defensive, facing an increasingly struggling economy. But Europe is closer to the NAFTA renegotiation results.
But on drug prices, Trump is hearing too many Democrat demagogues favoring central planning price controls to bring drug prices down. Maybe he is thinking he can renegotiate a better deal there too for lower drug prices. But there are better tried and true ways to achieve that goal.
One is deregulation, which has contributed so much to Trump’s booming economic recovery. FDA overregulation is the root cause of high drug costs. Manufacturers of life saving miracle drugs have to spend billions just to try to develop one successful new drug. In many cases, manufacturers spend billions on new drug development that fails to yield any return.
Public safety is a legitimate public concern, and regulations to ensure drug safety are well justified. But FDA regulation does not stop there.
Billions in added drug costs result from regulations seeking to ensure effectiveness as well as safety. But effectiveness is a matter of the judgement of your personally chosen doctors.
Opinions as to effectiveness can vary, and bureaucrats in Washington are not known for better judgement than your own chosen doctors subject to market competition, who know you and your needs far better than Washington bureaucrats insulated from any market competition.
Doctors with developed market reputations for knowing the latest breakthroughs in treatment and medicine have a lot more at stake than unknown bureaucrats hiding behind their desks in Washington.
And that market competition has achieved proven effectiveness in lowering drug prices. Medicare actually has four parts developed over the years: parts A, B, C and D.
The original Democrat Parts A and B are run by central planning, top down, big government, based entirely on taxation and redistribution of the people’s hard won earnings.
And it is those old fashioned Parts A and B which are responsible for most of Medicare’s over $100 trillion in unfunded liabilities. The entire American economy only adds up to about $20 trillion a year.
The more recent, Republican developed, Medicare Parts C and D are based on market competition, and have proven far more effective at controlling costs.
Part D is the drug program added about 15 years ago under President Bush. It is based on seniors choosing among competing drug coverage insurers, and it shocked Washington by coming in well under originally projected costs.
When Medicare Parts A and B were developed by Democrats in 1965, they were projected to cost about $9 billion by 1990. But when 1990 came around, they were costing more like $109 billion. No wonder that by today, almost 30 years later, Medicare overall is collapsing under more than $100 trillion in unfunded liabilities.
Medicare Part C is another Republican innovation based on allowing seniors the freedom to choose among competing private insurers to provide for their Medicare benefits. These companies offered added benefits with their coverage that better served the sickest and oldest seniors.
Washington was shocked to discover within a few years, about one fourth of seniors chose this private insurance instead of the standard Medicare, Big Government Monopoly.
A few years later, Washington was shocked again that one third of seniors had chosen more benefits for less costs from private insurers in the competitive marketplace.
These proven successes, deregulation and market competition, are the best means for bringing drug costs down. Not central planning, socialist, big government, price controls, that end up leaving seniors with less health care, less innovation, and less choice.
Peter Ferrara, senior policy adviser to the FAIR Energy Foundation and to the National Tax Limitation Foundation, teaches economics at King’s College in New York City. He served in the White House Office of Policy Development under President Reagan and as associate deputy attorney general of the United States under President George H.W. Bush.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.