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A Closer Look at the Drug Pricing Scheme

Thanks to Sen. Joe Manchin, other politicians in his party have seen item after socialist item fall from the budget reconciliation package to the cutting room floor. Thank heaven!

He’s given reality checks to extremist mischief. The past several months, Senate Majority Leader Chuck Schumer has wisely listened to and heeded the demands of his colleague from red state West Virginia.

Sen. Manchin’s prudence deserves praise. He’s carefully scrutinized the excesses his colleagues of the Left have pushed and pushed, much of it outright socialism.

Another item that amounts to socialistic policy remains on the budget reconciliation table. The wisest Democrat in the Senate hasn’t yet recognized its danger.

The Manchin goal is to help seniors struggling to pay inflation-fueled costs for their health care, food, gas and housing. The senator supports provisions sold as reducing prescription drug prices through direct negotiations. He’s also on board with extending extra Affordable Care Act premium subsidies ostensibly for two more years.

His goals are laudable. The problem and danger are the approach taken to reduce drug costs.

This pernicious policy—socialist policy—is the government dictating the price it pays for certain medicines.

It ensures a my-way-or-the-highway situation: The government sets the price. The brand drug company either takes the dictated price or faces punitive taxation.

There’s no level playing field. There’s no honest negotiation. There’s only artificially low payment for a valuable medicine used to treat patients for serious conditions or else a 95 percent inflation penalty on those drugs’ sales above inflation. This tax applies to sales not only in Medicare Parts B and D, but also in commercial markets.

Sen. Manchin’s crafty colleagues who concocted this scheme apparently haven’t given him the full picture.

Beyond the arming of bureaucrats with socialist price-control and tax weapons, other crucial aspects deserve sound-minded lawmakers’ consideration.

First, drug costs comprise less than 10 percent of U.S. health spending. Prescription drug prices have risen 2.5 percent over the past year, compared with 17.3 percent for health insurance and high cost increases for other health services. Medicaid and Part D average net prescription prices have fallen since 2009.

Second, price controls harm patients. The proposed vise will reduce development of new cures and treatments. The Congressional Budget Office underestimates 10-15 fewer new drugs over a decade due to price dictation. The innovation loss will be worse than that, and harshest for rare diseases and hard-to-treat cancers.

Diseases without early pharmaceutical interventions will require more patients’ use of hospitals and doctors’ offices for more extensive, expensive care as diseases progress.

Third, drug price controls will flow to medical providers. The government-set prices will lower provider reimbursement rates. Hospitals will charge commercially insured patients more for the same medicines.

All this comes amidst skyrocketing inflation that’s top of mind for Sen. Manchin. This “hidden tax” stands at 9.1 percent and likely worsening. The Federal Reserve is aggressively raising interest rates, risking recession.

Meanwhile, one-party-ruled Washington has overregulated, overspent, and threatens to do more of the same, with overtaxing on top. The reconciliation bill adds fuel to the raging fire.

The Obamacare subsidies shift costs to other Americans struggling under the highest inflation in 40 years, and carry other economic maleffects. They increase demand. Heightened demand drives politicians to impose price controls, here on the sector that's getting us through COVID. Next stop, rationing access to care and limiting patients’ coverage options.

Subsidies fund health plans that, instead of containing patient costs the past two years, have raised premiums and consumer cost-sharing. The extra monies do nothing to reduce inflation.

These subsidies may modestly improve affordability for some working-age people. It’s not free-market economics, it’s mainly political medicine for vulnerable Democrats potentially at risk when constituents see rising 2023 health premiums, though it isn’t naked socialism.

From the partisan budget reconciliation’s optimistic start a year ago, much of the original “Build Back Better” extremism has failed the Joe Manchin test. He and Sen. Kyrsten Sinema have courageously been the grown-ups in Democratic caucus meetings. They’ve protected America from parts of the Leftist policy agenda—at great personal risk and threats.

For the sake of the seniors and others Sen. Manchin wants to protect, for the integrity of the Medicare program, for the future of medical innovation and its health benefits and long-term cost savings, for the respect of private property rights and U.S. global competitiveness in biopharma, here’s hoping Sen. Manchin reapplies his test to the drug price-fixing-confiscatory-tax scheme.

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