Warren's Medicare-For-All Plan Would Deprive Her Fellow Americans
Senator and presidential-hopeful Elizabeth Warren (D-Ma) has made headlines in recent weeks by releasing the details of how she would fund her vision of Medicare-for-All. But far from the headlines, and hidden deep in her 9,000 word blueprint, lies her plan to put a stop to American medical innovation. By strong-arming innovators and removing all incentives to do medical research in America, Senator Warren’s ambitions would poison the development of life-saving medication to the detriment of consumers across the country.
As part of her ambition to provide Medicare-for-All, Senator Warren vows to grant federal bureaucrats sweeping new powers to negotiate prices with drug manufacturers. As one of the largest purchasers in the country, with Medicaid and Medicare Part D constituting 40% of retail drug purchases in 2017, it makes sense that the government should be able to ask for a bulk discount on prescription drugs. The problem is that Senator Warren’s so called negotiations look a lot more like wholesale theft.
Warren’s brand of Medicare-for-All would cap the price of any or all prescription drugs at 110% of an international benchmark and allow the government to negotiate prices down below that. But international benchmarking, as illustrated by a report by the American Consumer Institute, would lead to product shortages and a major fall in research and development.
If the starting point of these negotiations had not already decimated the country’s medical innovation, the next step surely will. Research by academics at Tufts University, Duke University, and the University of Rochester suggests that the average cost of bringing a prescription drug to market is almost $3 billion. What incentives are there for bureaucrats to recognize and fairly compensate this investment? None, if Senator Warren gets her way.
If negotiations fail, Warren plans to ride roughshod over their patents and to use public money to manufacture the drugs anyway. Rather than working with the world’s best pharmaceutical innovators, these “negotiations” amount to little more than an intellectual property smash-and-grab.
If the $52 trillion price tag of Senator Warren’s brand of Medicare-for-All can only be paid by seizing intellectual property below cost, this is no small concern for businesses and consumers. With little recourse to protect their investments and pay their own workers, scientists, and shareholders, why would pharmaceutical innovators continue to operate or sell their products in the United States? Instead of expanding access to healthcare, Senator Warren’s plan would pillage the industry in the short-term and deny access to all American consumers in the long-term.
Rather than expanding the government’s power to coerce and appropriate private property, candidates like Senator Warren should focus on making the government perform its functions more efficiently. At present, pharmaceutical patents generally last for 20 years, but it often takes 7 to 12 years for the FDA to certify a drug’s safety. That leaves companies with only 10 years to recuperate the cost of their innovation.
Even after the patent expires, it can take years for the FDA to again approve generic versions of the drug. Increasing the efficiency of regulators at the FDA and HHS would both allow innovators to spread their cost recovery over a greater time period, while also adding competition to the market as soon as possible. Recent efforts to streamline the approval process have demonstrated how the rise in drug prices can be slowed and should serve as a lesson for policymakers on both sides of the aisle.
Most Americans want lawmakers to address the cost of healthcare, and specifically prescription drugs. But ransacking the intellectual property of innovators simply does not make for a vibrant healthcare industry. Senator Warren’s approach is just not sustainable for businesses or consumers.
Oliver McPherson-Smith writes for the American Consumer Institute, a non-profit educational and research organization. For more information about the Institute, visit www.TheAmericanConsumer.Org.