In the Wall Street Journal, Paul H. Rubin and Joseph S. Rubin make an argument in favor of “crony capitalism” as a second-best solution. Their example from health care is Medicare Part D:
Some claim that Medicare Part D, which pays for drugs, was a giveaway to the pharmaceutical industry. But 40 years of research has clearly shown that the Food and Drug Administration’s regulatory process makes drug development and approval unnecessarily and inefficiently expensive. Perhaps, in this environment, supplementing the costs of drugs may move us toward a more efficient drug policy, and bring more life-saving drugs to market.
That’s not quite the way I see it. Medicare is widely accepted in American society, and excluding prescription drugs made no sense because prescription drugs substitute for more expensive treatments, especially hospitalization. Costs are below budget and seniors’ have lots of choices. So, Medicare Part D is a second-best solution, but it is a second-best solution to the socialization of health care for American seniors. It is not a second-best solution to the unnecessary costs imposed on pharmaceutical development by the FDA.
The best way to reduce those costs is to reduce the power of the FDA, not just make it easier for the pharmaceutical industry to pass these costs onto taxpayers. Indeed, we have a bit of a problem here, because the FDA is increasingly funded by user fees paid by drug makers and medical-device makers. However, this has accommodated industry to the FDA without improving the FDA’s performance. Another proposal, patent-term restoration, would have a similar consequence. Patent-term restoration refers to a proposal to add more time to a drug’s patent, determined by how long it took to be approved by the FDA. This would largely restore drug makers’ forgone profits, but it would not address patients’ suffering due to the FDA’s unwarranted obstruction of access to new medicines.
If a powerful industry is suffering from poor government policy, effective reform requires that policy wonks influence the industry to fix the poor policy; not to shirk the problem by seeking relief in taxpayers’ pockets.