- - Wednesday, November 17, 2021

Policymakers often create long-term harm while chasing short-term rewards.

Running up the national debt creates electoral goodwill now because people like free stuff. In the long run, debt service payments will increasingly crowd out other spending priorities. Eventually, the music stops.

The feedback loop created by guaranteed government-backed college loans and subsidies is similar. Although net tuition costs are temporarily reduced, the guarantee of student aid incentivizes universities to raise the price of admission higher, exceeding the rate of inflation.

The battle over drug pricing provisions in Biden’s Build Back Better proposal is another example of ignoring unintended consequences. Skyrocketing medicine costs are a very real problem. Since the year 2000, spending on pharmaceuticals has nearly tripled in the U.S. But under the guise of making medicine more affordable, the legislation compromises future health care innovation.

In short, the bill includes a provision that would apply de facto price controls on medicine Americans access through Medicare Part D. Proponents claim the lower costs are accomplished by simply allowing the government to negotiate prices with drug manufacturers. Sounds fair enough. But the definition of “negotiate” is being stretched like taffy. In this game between two interested parties, the government holds all the aces.

Rather than a relationship similar to consumers haggling over the price of apples at a fall festival, it would be more like a business owner “negotiating” with a mobster. Under the proposed rules for negotiating prices, assume pharmaceutical companies refuse to sell a particular drug at the government-picked price point. Subsequently, manufacturers could be soaked with a 95 percent excise tax on gross sales to non-government buyers, including insurance companies and individuals.

Talk about a deal you can’t refuse.

As the cost of some medicine is artificially driven down via government strong-arming, incentives to innovate would dwindle as research and development budgets shrink. Did you know bringing a new drug to market costs, on average, over one billion dollars? Somehow, that is an unimpressive cost of doing business to members of Congress. As former Sen. Everett Dirksen reportedly despaired over government spending, “A billion here, a billion there, and pretty soon you’re talking real money.”

Patients will become the ultimate victim. Fewer new life-saving therapies, treatments, and vaccines will become available. If the policy passes into law, the non-partisan Congressional Budget Office (CBO) estimates 59 fewer drugs will make it into the pipeline over the next 30 years. Expectedly there are caveats on the unknown health impacts. But pursuing short-term costs versus long-term health benefits is the driving force in these debates.

Uncharacteristic of modern Washington, concern over the proposal initially stretched the partisan divide. Democrats—including Sen. Kyrsten Sinema (D-AZ), Rep. Scott Peters (D-CA) and Rep. Kurt Schrader (D-OR)—opposed the drug pricing measure enough to move the needle. Democratic leaders were forced to water it down to attract a sufficient level of caucus support.

Although an improvement on the initial proposal, the “compromise” is not exactly a winning stance. Under the new deal, only some drugs will be subject to price controls. It’s like saying only some channels will be blocked from your television. Fingers crossed you prefer MTV to the History Channel.

The result will be the same. Just a smaller number of sick patients denied pharmaceutical innovation. 

Inviting large long-term consequences to gain short-term benefits is only palatable to politicians who need to stand for re-election. We deserve better.

• Richard Berman is the president of Berman and Company, a public affairs firm in Washington, D.C.

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