Think back to your teenage years. You saw a new video game system or wanted to attend a concert with friends. After asking permission, Mom politely—but firmly—says “NO.” Next, you find yourself “negotiating:” You promise to get all of your homework done before turning on the TV. You promise to take the garbage out before being asked. You offer your entire world, only to realize that negotiating with the people who hold all of the cards, isn’t a negotiation at all.
Now, imagine leading a multi-billion dollar corporation that provides life improving- and life saving medicines. You have the responsibility for thousands of lives—your employees, who invest their time and skills, your shareholders who provide the funds to keep these activities going, and your suppliers who do everything from bring raw materials in to take finished products out. You soon find yourself in a “negotiation” with a government official over the price of several drugs for Medicare, quickly realizing that trying to bargain on price with the same people who control your access to the marketplace is just as fruitless as negotiating with Mom about that concert or video game console.
Thanks to the language used—the magnanimous-sounding “negotiation”—many Americans didn’t recognize the parallel. Pharmaceutical companies were once again painted as winners in an imaginary struggle between a bedraggled proletariat and an indifferent, greedy bourgeoise. Thus, it was easy for the Inflation Reduction Act of 2022 to create an unequal power dynamic that forces drugmakers to sell selected products at whatever price their regulator dictates. After all, should they decline to participate in these farcical negotiations, each company runs the risk of losing market access for existing drugs, while damaging prospects for the approval of future offerings. Heads, I win. Tails, you lose.
Yet, the Inflation Reduction Act’s disguised price control scheme was not its only problem. Another major drawback is the difference in the treatment of pill-based medicines—also known as “small molecule” drugs—versus so-called “Biologics.” Pills become eligible for “negotiation” several years earlier than Biologics. This approach completely ignores what the respective drugs do and every aspect of the development and manufacturing process. At each step, millions of dollars and centuries of knowledge are invested by drugmakers and their staff members to produce the wide variety of medications that have positively changed the lives of many. This ham-handed approach of determining a drug’s value based on form alone, ignores the reality of bringing medicine to market.
In many ways, this is a microcosm of why the free market far outstrips the command-and-control approach to economics: the former recognizes the work, inputs, and benefits of each respective product, whereas the latter ignores every aspect of this, sharply reducing the ability or incentive for any of the participants in this chain to continue their work.
A positive step has been the introduction of H.R. 1492 by Rep. Greg Murphy (R-NC). Entitled the Ensuring Pathways to Innovative Cures Act, this legislation would take the small but critical step of ending the unequal treatment of small- and large molecule drugs. While H.R. 1492 solves an important problem, our quest must be to prevent the adoption of future direct- or indirect efforts at price controls by helping our fellow Americans recognize how ingrained the free marketplace is in our daily lives.
After all, we use a plethora of apps to help us find the lowest prices for prescription drugs. We innovate to lower costs further. We enthusiastically take responsibility for our own lives, long before politicians can belatedly ‘rescue’ us. We live the free marketplace. Living the free marketplace is powerful, but the ability to recognize, communicate, and educate others about this is a key aspect of maintaining our long-term economic liberty.
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