The New Jersey Star-Ledger ran an editorial titled No, Andy Kim is not coming for your Medicare.
A dark money group is running a scaremongering ad campaign against N.J. Congressman Andy Kim, suggesting that he wants to cut Medicare to pay for the $3.5 trillion Democratic spending plan.
Sign a petition to oppose this, it blares – “Lives depend on you today.”
Be aware: This is a scam. The claim is pure nonsense. The $3.5 trillion plan doesn’t cut Medicare, it enhances it by adding coverage for dental, hearing and vision. And it covers the cost of this by negotiating lower prices for prescriptions.
Political ads can be misleading. But the issue here is empowering Medicare to “negotiate” prices with pharmaceutical companies for prescription drugs the government agency buys. The Star-Ledger goes on to support that proposal.
But the editors ignore crucial context.
First, Medicare is not just another prescription drug buyer, like private insurance companies. Medicare has a government-enforced monopsony over the senior prescription drug market, stemming from its monopoly over most of the 65+-years-old healthcare market for seniors.
Second, Medicare is part of an institution, the federal government, that has life-and-death control over which drugs get approved, and the companies that produce them. Theoretically, Medicare is independent from the FDA, which has that power. But what’s to stop FDA bureaucrats from communicating with Medicare officials? What’s to stop implicit threats by Medicare negotiators regarding approval of unrelated experimental drugs under FDA review from entering into negotiations with pharmaceutical companies? Then there is the IRS and the antitrust powers of the federal government.
The idea that there can be fair and just negotiations between a private company and the federal government, an institution with so much coercive powers over private business, is a joke. Such
“negotiations” would be akin to a speakeasy “negotiating” protection money fees with the Al Capone organization during Prohibition.
There is also the double-talk about high prescription drug prices. The Star-Ledger ignores the role of the FDA itself in making drug approvals so expensive. If COVID-19 has given us lessons, there is no more consequential lesson to be learned than that the costly drug approval process can be dramatically cut. Rather than give the Medicare monopsony the power to “negotiate” drug prices -- which is really just another term for price controls -- the Star-Ledger should urge major reforms to the Food and Drug Administration.
The Star-Ledger ridicules the idea that Medicare “negotiating” power would hamper and disincentivize cutting edge drug research. But the FDA already does that. Empowering Medicare to effectively force drug prices down after the FDA forced them up to begin with would just further cripple drug development.
The Star-Ledger writes, “because the government has no power to negotiate, it must pay whatever drug price the industry charges, a cost that gets passed down to consumers.” Well, it shouldn’t have that power. That power stems from Medicare’s monopoly power, in which government officials muscle their way in between drugmakers and their consumers. This cuts out the best regulator of drug prices, the interaction between producers and consumers. That’s fundamental economics. Free markets are missing in the senior prescription drug industry.
There are very good reasons why, more than half a century after the formation of Medicare, Medicare still can’t negotiate prices. And it’s not the Star-Ledger’s childish blaming of “Pharma fearmongering.” There are real risks to freedom and health in Rep. Kim’s scheme.
Related:
Pharma Can’t ‘Bargain’ With a Medicare Monopsony
Pharmaphobia: How the conflict of interest myth undermines American medical innovation—Thomas P. Stossel
The Cure in the Code: How 20th Century Law is Undermining 21st Century Medicine—Peter W. Huber
New NJ Reg Would Cut Doctors Off From Information and Curb Commerce
Drug Advertising: New Zealand and the USA are Right, and the Rest of the World is Wrong
Huber on the Personalized Medicine Revolution—and the Government Roadblocks
How the FDA Violates Rights and Hinders Health—Stella Daily Zawistowski
Close the FDA’s “Loopholes” of Statism, not Freedom
On Mylan’s EpiPen Pricing Controversy
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