What do Sen. Marco Rubio, Sen. Bernard Sanders and Hillary Rodham Clinton have in common? They’re all talking about the skyrocketing cost of prescription drugs in America. They disagree on almost everything else, but this issue is too big to be ignored. It is one of the key inflation factors driving health care costs. And it’s a particularly good issue for conservatives.
First, Americans pay more than any other nation in the world for their prescription drugs. Drug companies give many excuses why: price controls in other countries, the high cost of research and getting FDA approval, high risk/reward expectations of investors, etc. While there is some truth in all of these arguments, the underlying fact is that pharmaceutical companies charge outrageous prices here in the United States because our policymakers let them. It’s an example of pure crony capitalism.
The drug industry hides behind the free-market banner. But free markets require real competition, some degree of price transparency and consumers who can freely choose products. Few of these ingredients exist in the U.S. drug market. Drug companies have used their market and political power to tilt the playing field. They acquire or simply pay competitive patent holders to keep drugs off the market, all under the sleepy eyes of federal regulators. Where there are competing patents like Viagra and Cialis, prices are aligned (fixed) with huge margins and no price competition.
With little fear of federal antitrust interference, we are seeing merger mania. As I write, two of the world’s largest drug companies — Pfizer and Allergan — are discussing a mega merger that would further crush any real competition. The drug companies have skewed our trade laws to protect them not only from foreign competitors, but from themselves and the sweetheart prices they charge in other industrialized countries.
Obamacare was supposed to save every American family $2,500 per year, remember? Not only is the cost of government-mandated insurance jumping 35 percent in some states, drug prices have seen a meteoric rises, some up to 5,000 percent. Both are symptoms of massive policy and market failure. U.S. wages are stagnant. Add the fact that retirees have received tiny increases in Social Security payments in the last three years and you see why voters have good reason to be unhappy with establishment candidates and the status quo.
Obamacare passed with no votes to spare thanks largely to help from Big Pharma. It agreed to support the legislation in return for continued market protections and millions of newly insured customers. The result is a lopsided market leaving Americans paying the highest prices in the world for medicines. For example, the drug Cymbalta for depression costs $46 in the United Kingdom, $52 in the Netherlands and a whopping $240 here in the States.
Americans are outraged and for good reason. I encourage Republican candidates to take up the issue and expand the debate beyond Obamacare (as much as we dislike it) to the door of the drug companies. These crony capitalists have protected their American profit advantage long enough. Seldom will conservatives find an issue more fertile for advocates of free-market populism.
And while we are holding Big Pharma’s feet to the fire for profiteering, conservatives need to know about the industry’s attack on a little-known statute called the 340B drug discount program. Signed into law in 1992 by President George H.W. Bush, the program requires drug companies to provide discounted medications to safety-net healthcare providers that treat high numbers of poor patients. These hospitals provide $26 billion worth of uncompensated care each year, even with Obamacare. These discounts help providers stretch scarce resources, funding free and low-cost drug programs and clinics in urban and rural communities across America.
As the drug industry ratchets up prices to never-before-seen levels it is trying to maximize profits even more by limiting eligibility for 340B. This is one of the few programs that helps hospitals keep drug costs under control. It represents only 2 percent of the U.S. pharmaceutical market. Even better for conservatives, 340B is not taxpayer funded. It’s financed by the discounts provided by drug companies.
Everyone knows that health care costs and exploding drug prices are bankrupting us. Grandma said, “Silence gives consent.” Conservatives need to speak out during the coming campaign season. We need to dust off antitrust laws and sound a little more like Teddy Roosevelt and less like spokesmen for the drug industry. We need to open the American pharmaceutical market, create real competition and level the playing field with the rest of the industrialized world. It’s good policy and great politics. Adam Smith was right, markets work.
Crony capitalism does not.
• Republican Gil Gutknecht is a former congressman from Minnesota. He consults with a number of companies and organizations, including 340B Health, a nonprofit association of providers participating in the 340B drug discount program.