The United States spends more on healthcare per capita than any other country in the world. For example, a medical procedure fitting cardiac implants following a heart attack can cost up-to six-times more in a U.S. hospital than in Germany. And while Americans pay less for generic medications compared to most other countries, patients pay a premium for brand name drugs.
This status quo is frustrating for America’s seniors and working families. Although no silver bullet policy exists to bridge the cost disparity overnight, there are reforms that will help.
America’s pharmaceutical supply chain is uniquely complicated. While most of the world’s healthcare innovation happens within our borders, once products leave the manufacturing facilities, they must navigate a complex web of hospital networks, insurance companies, and middlemen that all take a cut. It is a black box with little pricing transparency and adverse incentives that inflates costs.
One of these puzzle pieces that is in the crosshairs of the White House and Congress are pharmacy benefit managers. These are the doorkeepers between drugmakers and the consumer market that are partly responsible for ballooning costs. Why? Because these entities make larger profits off more expensive medications and are therefore motivated to push products with bigger price tags onto patients.
Delinking the revenue streams of these middlemen from medicine prices will reset incentives to encourage more affordable, generic drugs.
Executive action taken by the Trump administration earlier this year is another step in the right direction. It aims to foster price transparency among hospitals and insurance companies —making it easier for Americans to shop around for the best healthcare deal. Expanding upon these reforms to offer patients more options in a competitive market will continue to pressure prices downward.
But not all ideas aimed at lowering prices are winners. Some well-intentioned policy prescriptions will inevitably backfire and blunt America’s medical innovation supremacy. Government price controls are among the duds and a scheme that is not limited to a single political party.
Democrats forced Medicare price controls through Congress as part of the Inflation Reduction Act in 2022, which is already throwing cold water on new medical research projects. And that follows highly publicized efforts from the likes of Senators Bernie Sanders and Elizabeth Warren who pushed socialized medicine in the form of “Medicare for All” several years ago.
The latest reincarnation is coming from a small group of Republicans. The White House—along with allies like Sen. Josh Hawley—is advocating for a government price manipulation scheme dubbed “Most Favored Nation.” In short, supporters are proposing that the price of prescription drugs in the U.S. be tied to the government-mandated, artificially low prices that European countries pay.
It does not take a genius to understand that importing European-style socialized medicine is a bad idea. Americans currently have rapid access to a growing variety of new lifesaving treatments, therapies, and vaccines because of free market incentives. Meanwhile, access for patients across the Atlantic can be delayed for years.
And when they do finally arrive, these countries face frequent shortages because in a government-controlled system, supply does not meet demand.
Government price controls also reduce incentives for drugmakers to invest in research and development, potentially ceding leadership to hostile countries like China — a trend already emerging in Europe. As we learned during the COVID-19 pandemic, the U.S. cannot afford to outsource manufacturing of essential products, including medical equipment and drugs, abroad.
Tackling high healthcare costs while protecting medical innovation is a delicate balancing act. It requires stimulating healthy free market mechanisms while creating system-wide pricing transparency that allows families and businesses to shop around for the best deals. Heavy-handed government planning and control, meanwhile, will send us in the wrong direction.
Dr. Tom Price served as the 23rd U.S. Secretary of Health and Human Services and is a former member of Congress from Georgia.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.
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