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DTC in Perspective: Hillary Has Plan to Fight “Unjustifiable” Drug Prices

September 9, 2016 by Bob Ehrlich0

The drug companies made Hillary’s enemies list earlier this year along with Iran, the Republicans, and the NRA. She now has a plan to ensure drug prices do not rise higher than whatever she thinks is fair. The essence of her plan is to allow government to decide whether a drug price increase is justified. She had earlier announced her desire to end the tax deduction for drug marketing. I have included a good summary of the full plan from Street.com.

Bob Ehrlich
“Regulating prices will lead to less R&D.”
-Bob Ehrlich

While some drug companies have had extraordinary price increases, it is a rare event. EpiPen has made the news recently for a 500% increase. They have responded to the criticism by offering extensive reductions for those people who cannot afford it and saying they will launch a generic. Free market criticism led to free market price reductions. We did not need a government overseer to decide what price is fair.

Ms. Clinton feels like her $250,000 per speech fee is a fair price for her wisdom. She charges public universities that price even though it is a canned presentation. Somehow she believes in free market pricing for herself but not for drug companies. Bill and Hillary both give that aww shucks answer that they just take what is offered them and how amazing it is that people are willing to pay them so much. Her cost of production for that 30 minute canned speech is $0 but she likes to get what the traffic will bear. A drug company that takes years and a billion dollars of R&D to find a winning drug must be made to justify its price to a group of bureaucrats in her new plan.

I admit some drug companies have had surprisingly large price increases on some drugs. The solution is obvious. Free markets will generate competition for alternatives to these drugs. EpiPen will see competition enter the market just because the market is so profitable. The real danger of Ms. Clinton’s “plan” is at what point do the price controls stop. Once the government is allowed to decide what is a justified price for a few selected drugs eventually we will evolve to full price controls for all branded drugs.

There are many politicians who want exactly that. They want drug full price controls and government run health care. As I have said on many occasions, higher U.S. drug prices provide incentives for innovation. Regulating prices will lead to less R&D. That means the next time a new virus or anti-biotic resistant bacteria emerge we will be fighting them with outdated drugs.

Maybe government will take over the R&D function but government innovation is usually an oxymoron. Our government data is hacked routinely, our VA health care is a mess,  and our TSA often seems to have trouble spotting a pistol in a carry on bag. So I’ll trust private industry to innovate better than the government. I know Bernie Sanders and Michael Moore envy more advanced health care countries like Cuba where everything is regulated. After all, we know Havana is now the capital of new drug development and medical technology.

Hillary Clinton never misses an opportunity to take on the politically popular foe. I fully admit drug companies are ripe targets and often their own worst enemy. Drug companies must do more to have a consumer oriented pricing strategy. Her “plan”, however, is nothing more than political pandering and will do much more harm than good. She or Bill could of course buy 1000 EpiPens for each $250,000 speech and donate those to needy Americans. Now that sounds like a good plan.


Bob Ehrlich

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