- 911
In contrast, under the government’s new authority, companies that “negotiate” will have to accept whatever price Medicare decides to set — even if it’s absurdly low. This is not very negotiation-like. Nor can companies refuse to negotiate; if they do, they’ll be slapped with an excise tax so stiff, they could end up losing money on every unit they sell to Medicare. The only way for a company to avoid paying the tax or accept the “negotiated” price is to withdraw all its drugs from Medicare and Medicaid, which together account for 40 percent of drug spending in the world’s richest market.
Good! you might be thinking. If federal drug spending is so lucrative they can’t afford to give it up, we ought to use that muscle to get cheaper prices for ourselves. In fact, we ought to be doing this a lot more.
This is an understandable sentiment, but two things should give pause. First, the Constitution might not allow the government to force its subjects into heads-I-win-tails-you-lose deal making. Even if it does, encouraging the government to make offers its subjects can’t refuse might not be wise.
The second problem is that, as any economist will tell you, price controls reduce supply. Artificially hold down the price of bread, rental housing or anything else, and you end up with a shortage. Artificially reduce the price of pharmaceuticals, and … well, actually, you might not end up with shortages of existing drugs, because of the odd structure of the pharmaceutical market: It costs very little to produce most drugs, but billions to winnow a single successful candidate from many promising failures and shepherd that treatment through expensive rounds of clinical trials.
https://www.washingtonpost.com/opin...anies-incentives-negotiations-price-controls/
Good! you might be thinking. If federal drug spending is so lucrative they can’t afford to give it up, we ought to use that muscle to get cheaper prices for ourselves. In fact, we ought to be doing this a lot more.
This is an understandable sentiment, but two things should give pause. First, the Constitution might not allow the government to force its subjects into heads-I-win-tails-you-lose deal making. Even if it does, encouraging the government to make offers its subjects can’t refuse might not be wise.
The second problem is that, as any economist will tell you, price controls reduce supply. Artificially hold down the price of bread, rental housing or anything else, and you end up with a shortage. Artificially reduce the price of pharmaceuticals, and … well, actually, you might not end up with shortages of existing drugs, because of the odd structure of the pharmaceutical market: It costs very little to produce most drugs, but billions to winnow a single successful candidate from many promising failures and shepherd that treatment through expensive rounds of clinical trials.
https://www.washingtonpost.com/opin...anies-incentives-negotiations-price-controls/
