Bluegrass Beacon – Drug pricing: Bustling marketplace or stifling monopoly?

BluegrassBeaconLogoYou probably sense that few drug makers can compete in arenas with the likes of a mega-pharmaceutical giant like AbbVie, which employs 30,000, raked in $26 billion last year alone and deserves blame for some of those irksome TV prescription-drug commercials.

You’ll also likely detect that prescription prices may be out of reach and a matter of life and death for some.

But if you’re a common-sense conservative, you’re wary about digging in too hard on solutions regarding this dilemma out of concern that (a) you’ve been misled about prices by those with big-government solutions in search of problems, and (b) even if the situation demands attention, whatever response the U.S. Food and Drug Administration or some other fervid bureaucracy concocts will exacerbate rather than ease or eliminate it.

The whole Affordable Care Act (ACA) is reason enough to let skepticism serve as your default position when hearing about bureaucrats or politicians offering solutions to health-care issues like drug prices that sadly may remain out of reach for the sickest among us.

Pressing problems regarding our nation’s health-care policy demanded attention before the federal reform was signed into law by President Obama, like the need to create paths to coverage for individuals with preexisting conditions, reduce overcrowded emergency rooms and ensure an effective safety net was in place for the indigent and disabled.

Instead, we got a wealth-redistribution program that mandates, subsidizes, taxes and punishes – everything but protecting patients and making care more affordable for most who are forced to participate.

Health-care economist Robert Book reported in Forbes that insurance premiums “across the board, for all ages and family sizes, for HMO, PPO and POS plans” rose by 60 percent between 2013 – the year before Obama’s reforms took effect – and 2017, compared with premium increases of less than 10 percent in the same length of time before ACA’s implementation.

It’s a classic example of government recognizing a problem and then doing all in its power to make things worse.

Similarly, attempts at dealing with rising prescription-drug prices with more heavy-handed cures like price controls – which some states favor and others, including the federal government, are, have or will be tempted to enact – discourage investment in the research and development leading to miracle creations like AbbVie’s Humira, which treats the debilitating disease of rheumatoid arthritis.

In fact, the Food and Drug Administration’s antiquated regulatory process is a contributing factor to rising brand-name drug prices, up 208 percent since 2008.

However, the fact that prices for these drugs’ generic equivalents dropped nearly 74 percent during the same period indicates there’s more to those higher brand-name prices than solely the cost of navigating FDA rules.

The truth is, some brand-name pharmaceuticals are practicing the worst form of crony capitalism by misusing safety regulations and protocols to lock generic drug makers out of the arena, keeping their lower-cost-but-just-as-effective products off the pharmacy shelves far past the patent period.

Patent laws rightly protect drug creators from generic competition for 14 years, allowing them to recover their often-huge investments in creating these wonders of modern medicine and turn a healthy profit.

But generics must not be shut out forever, especially with rising health-care costs and lives at stake.

QuintileIMS reports the use of generics saved Kentuckians $5.3 billion just in 2015.

Those savings could increase dramatically if, as the U.S. Senate is considering in the CREATES Act, loopholes used by brand-name drug makers to limit accessibility to their generic competitors long beyond patent periods are closed and reforms are injected into the process so that the prescription drug-making landscape a bustling marketplace with lots of competitors instead of a stifling monopoly controlled by crony capitalists.

Jim Waters is president and CEO of the Bluegrass Institute for Public Policy Solutions, Kentucky’s free-market think tank. He can be reached at jwaters@freedomkentucky.com and @bipps on Twitter.

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