by Mitch Kokai
Senior Political Analyst, John Locke Foundation
[A]n industry group formed to lobby for prescription drug price controls has seized on the issue to opportunistically press Congress to impose price controls and force Gilead to sell at a lower, politically-determined price. That would set a very dangerous precedent for several reasons.
First, the argument for price controls fails every reliable economic theory in the book. Ten years ago, the late Milton Friedman joined over 150 of his peers in arguing against them. In their words, “Drug price controls are more difficult to remove than other price controls. Controls on oil and other products often tend to be limited or short-lived, as voters eventually object to the resulting shortages and distortions. The effects of drug price controls, however, are far more difficult to observe because they mainly affect medicines that haven’t been invented yet.”
When innovators are on the cusp of major advances in cancer, diabetes, HIV/AIDS and hepatitis C, among others, arbitrarily limiting the economic rewards for a major breakthrough will make it more difficult to raise capital, stunt innovation, and hurt patients who rely on new advances.
Second, if this concept were ever to see the light of day, we would risk one of our greatest opportunities to address chronic disease prevention and management. Nearly half of the U.S. population has at least one chronic disease. These conditions lead to higher utilization of medical services and therefore higher costs. The drugs at the center of the controversy are a great example, because a cure, even an expensive one, for hepatitis C is far less costly than ongoing treatment.
Third, the principal advocate for price controls is masquerading as a consumer interest group, while actually representing major industry players who should be capable of negotiating without getting Congress to put a thumb on the scale.