Will Drug Companies’ Price Firewall Melt?

Variety of Medicine in Pill BottlesA recent Kaiser Family Foundation Tracking Poll brings dire news for innovative drug companies: 83 percent of respondents favor a policy “allowing the federal government to negotiate drug prices for Medicare beneficiaries.” That includes 93 percent of Democrats and 74 percent of Republicans.

Despite dramatic headlines about pharmaceutical price increases, they have been in line with price increases for other health goods and services. Medicare payments to doctors and hospitals have been negotiated by government for over half a century, without containing costs.

Nevertheless, we are at a point in the polls where any careerist politician, Democrat or Republican, will likely follow Hillary Clinton’s lead demanding politically fixed drug prices. This teaches a lesson about inviting the government into your business.

The Medicare Modernization Act of 2003 was the result of an “all hands on deck” lobbying effort by drug companies to get prescriptions added to Medicare, but without government price controls. The result was Medicare Part D, which is only offered through private insurers. Medicare Part D’s so-called “non-interference clause” prevents the federal government from fixing prices. Instead, prices are negotiated between drug makers and insurers. It looks like that firewall could melt.

The fact is, you cannot invite government dependency without political interference. And you cannot just pay the politicians off. Here is a list of the U.S.-based pharmaceutical enterprises which have given at least $100,001 to the Clinton Foundation, either as donations or speaking fees, compiled from the foundation’s website: Pfizer, Merck & Co.., AstraZeneca, Drug Chemical and Allied Trades Association, Inc., Gilead Sciences, Johnson & Johnson, Sanofi-Aventis, and the United States Pharmacopeial Convention (USP). All this money has done is encourage her attacks on their businesses.

There is no point discussing the rationality of it. If we were to debate the consequences of government dictated prices on drugs, and I made the case that artificially low, politically imposed, prices would dry up capital investment, innovation, and the development of better drugs with fewer side effects, I would have – at best – a 50/50 chance of winning the debate.

If, on the other hand, someone (e.g. Bernie Sanders) proposed the U.S. Department of Transportation should “negotiate” prices of automobiles for every senior, and I made the case that this policy would result in seniors having a very limited choice of sub-standard cars, and dramatically slow the rate of innovation in new automotive technology, I would surely win the debate immediately.

Comments (15)

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  1. Jimbino says:

    Our gummint is nothing if not stupid and intrusive. Why not support a simple policy change that would allow insurance and SS dollars to be spent on drugs from Mexico, Canada and India, instead of instituting gummint price controls?

    • John Fembup says:

      Jimbino that policy already exists. You can spend the money you are entitled to anywhere you like. You just can’t spend the money I’m entitled to anywhere you like. Not yet, anyway.

      And just out of curiosity Jimbino, where do you live?

      • Sure but you cannot import in bulk. That would violate intellectual property rights of patent holder. It is not a solution because patent holders would hike prices in foreign countries, or cut supply, in response.

        • John Fembup says:


          I was not thinking in terms of any “solution” only answering Jimbinos call for a policy change that would also not be a solution, but would benefit himself.

        • Devon Herrick says:

          I find it interesting that Americans order drugs from abroad, which are inspected at the port of entry before allowed into the country. Scanners used by the Customs Service can tell the packages contain drugs, but they are sent on through. Only once a year (typically for a couple weeks in June) Customs and the U.S. Food and Drug Administration (in conjunction with Interpol) cracks down on Internet drug importation. Then a couple weeks after the FDA and Customs issues a press release praising the crackdown, Customs begins to accept and pass through shipments again. There seems to be an unofficial policy to allow small scale reimportation (and more likely, importation of unauthorized generics).

    • PJohnson says:

      There a virtually no drug companies in Mexico, Canada or India. They overbuy US drugs than sell them back. And were, say, Mexico to start manufacturing drugs other than cocaine, I’ll let you be the first to swallow that pill.

  2. Barry Carol says:

    Importing cheaper drugs from foreign countries sounds good but what happens if they turn out to be tainted or worse, counterfeit? Don’t expect to sue the drug manufacturer if that happens and good luck trying to sue the seller. Caveat Emptor.

    • Allan (formally Al), but due to the lefts propensity to disrespectfully and disruptively alter facts I will now refer to myself as Allan and the former Al Baun can keep his newest name. says:

      That, Barry, is true with everything. We should probably place a landfill tax on Chinese goods entering the country. That is where much of the stuff ends anyway long before expected.

      With all this protection you are requesting, how well does the FDA protect us from faulty indian medication that is licensed to be sold here?

  3. John Fembup says:

    “U.S. Department of Transportation should “negotiate” prices of automobiles for every senior”

    May be worth trying, but why start with seniors? Start with buyers under 50 just, you know, to demonstrate how popular such a government program could actually be. 😎

  4. Doc Steve says:

    Doesn’t it make very apparent that what Hillary says and promises and what she negotiates in smokey backrooms for the big bucks are not the same?

  5. Jimbino says:

    There is no “intellectual property rights” problem for the person who takes a short bus or plane ride to Mexico or Canada to buy drugs there. In Mexico, Brazil and other countries, you can buy prescription drugs over-the-counter for very cheap, especially since you don’t have to consult a doctor for a prescription.

    Nobody in his right mind would pay a doc for a prescription for Mebendazole, Metronidazol, Metformin, Glimepiride and many other drugs he can get in Mexico for “the price of a banana.” Unless your doc is an Amerikan animal doc and the prescription is “for my dog (or my cat).” Trouble is, having insurance puts a person not in his right mind. Having to spend your own money brings instant clarity.