The Republican Temptation to Cave on Medicare for All
Congressional Democrats have made so-called “Medicare for All” a central part of both their governing agenda and their 2020 campaign platform. Most conservatives have focused on the enormous fiscal cost of this boondoggle: The best estimate is that paying for the program would require $32 trillion in tax increases over the next decade.
While that fiscal burden is staggering, the tally on human lives could be even worse. In addition to direct attacks on life, Medicare for All targets our most vulnerable fellow citizens by putting the drug industry out of business. According to the Kaiser Family Foundation, every Medicare for All bill that has been introduced contains government “negotiation” of medicine prices under threat of compulsory licensing (that is, the drug manufacturer agrees to the “negotiated” rate or the government steals their drugs — price control, or else).
The inclusion of this Mafioso-style “negotiation” shakedown is no coincidence. The generic drug industry, which would stand to benefit from the demise of their innovator drug competitors, is working hand in glove with Congressional Democrats to advance Medicare for All. Make no mistake — the plan is to end name brand drug manufacturers as we know it, and those championing the move are an unholy alliance of Democratic Socialists and generic drug lobbyists.
Why should most Americans care? After all, 90 percent of the drugs we consume every year come from the generic side of the industry, and the most costly drugs are in the remaining sliver. The answer is that name brand drugs are expensive because they are the result of billions of dollars of research, development, testing, and an onerous FDA approval process. A study last year by Tufts University pegs the development cost of each new drug at $2.6 billion. Every time there’s a new miracle treatment for HIV or a cure for high cholesterol, drug companies had to pay billions just to get it to consumers.
Our Constitution’s delicate checks and balances come into play once a new drug has been developed. The Founders gave Congress the right to grant exclusive patent authority to inventors for a fixed time so that creators could recoup the cost of development and finance the next round of discoveries. That’s governed in modern times by the highly successful Hatch-Waxman Act, which allows name brand drug companies to be the sole seller of a new drug they have developed for a little over a decade. After that patent life ends, the manufacturers of generics are free to develop equivalent drugs and sell them for pennies on the dollar. Yet despite the 90 percent market share they enjoy, the generic side of the pharmaceutical sector is working actively with Congressional Democrats on “Medicare for All” in an iron triangle power play to destroy their name brand competitors.
What happens if Medicare for All government “negotiators” come in and impose price controls under threat of theft (“compulsory licensing”)? The answer is that drug companies will no longer have the ability to recoup the costs of their inventions, and there won’t be any more new miracle cures. The pharmaceutical technology we have today will be frozen in time like bureaucratic amber. You can’t force the bakery to sell donuts for a nickel and then expect the baker to keep doing it. The only alternative to this is for taxpayers to take over drug research in a costly NIH expansion.
Unfortunately for all of us, Republicans in Washington are in many ways eager to cooperate with this central pillar of Medicare for All. The Department of Health and Human Services has advanced a proposal called the “International Pricing Index” which would impose European socialized medicine price controls on physician-administered drugs purchased by Medicare (most believe this is a camel’s nose under the tent for price controls on all Medicare drugs, and then all drugs in this country). The IPI and similar price control regimes like so-called “drug importation” have Republican allies as rock ribbed as Senate Finance Committee Chairman Chuck Grassley (R-Iowa) and House Freedom Caucus Chairmen Congressmen Jim Jordan (R-Ohio) and Mark Meadows (R-N.C.).
The goal each of these conservative stalwarts have is admirable — bringing down the price of drugs for their constituents. But their means of doing so is not politically savvy. By offering “Medicare for All Lite,” these Congressional Republicans are playing into the long game of Bernie Sanders and Alexandria Ocasio-Cortez. Instead, Congressional Republicans should advance more serious proposals that would bring down the price of drugs in a market-driven way. A good example here is the HHS’s “rebate rule” which would greatly reduce drug list prices while getting middlemen out of the way of the resulting consumer savings. Combine this with streamlined FDA approval of new drugs and a pro-intellectual property update to Hatch-Waxman, and the Republicans will have a drug price cutting platform on their hands.
The alternative is to see a repeat of what happened in Obamacare: losing in slow motion.
Ryan Ellis is President of the Center for a Free Economy.
