As Senate Democrats prepare to move ahead on a $3.5 trillion “human infrastructure” bill, they have to find ways to offset the cost.  One measure being discussed is to have the government “negotiate” drug prices in Medicare Part D.  But there are serious problems with this idea.  The government would use price controls, which would undermine private sector negotiations that have saved taxpayers billions of dollars and have been protected through the non-interference clause in the Medicare Modernization Act.  These savings are never cited by pro-big government politicians.  In 2005, just before Medicare Part D was  implemented, the Congressional Budget Office (CBO) estimated Medicare Part D would cost taxpayers $172 billion by 2015; its actual 2015 cost was $75 billion.  The premiums have remained low and stable for many years and the program is popular with seniors.  Before Medicare Part D, one in four seniors did not have prescription drug coverage, now 90 percent do.

The impact of government negotiations on lower prices was described in a 2019 letter written by the CBO to Sen. Chuck Grassley (R-Iowa).  CBO stated that unless a rigid formulary was established, meaning the government would decide what drugs seniors would have access to, that “providing broad negotiating authority by itself would likely have a negligible effect on federal spending” and a “modest” at best effect for negotiating a select group of expensive drugs.

The idea of the government setting price controls in Medicare Part D is nothing new. Democrats have called for the secretary of Health and Humans Services to negotiate drug prices practically since Medicare Part D was implemented.  Frankly, it sounds great, and the message can be effective, until people learn more about what government negotiation means.

The Kaiser Family Foundation (KFF) released a poll in June 2021 about several proposals Congress is considering in healthcare and asked which policies should be considered priorities.  Nearly 88 percent of the public believes that allowing the government to negotiate for lower prices on medications is a top priority.  This includes 77 percent of Republicans, 89 percent of independents, and 96 percent of Democrats.  Also, 92 percent of those polled want to allow state governments to negotiate drug prices too, 90 percent want Medicare to expand services to include hearing aids, dental, and vision care, and 88 percent want a limit placed on out-of-pocket expenses for prescription drugs.

But these numbers change with a shift in the argument.  For example, if allowing the government to negotiate for lower drug prices led to less research and development of innovative drugs, the favorability drops to only 32 percent and opposition to government negotiation rises to 65 percent.  And if allowing the government to negotiate drug prices led to limiting people’s access to newer drugs, only 31 approve while 65 percent oppose.  According to KFF, support drops for government negotiation across party lines, with Democrats as low as 39 percent and Republicans at 24 percent if it meant less access to innovative therapies.

Members of Congress often pontificate that advertising and marketing are a major reason drug prices are high, but Democrats, Republicans and independents agree at an average of 52 percent that this is not a major reason.  They are much more likely to agree, at an average of 78 percent, that high profits are the major reason.  But profits provide the funding for research and development of new drugs and an average of 68 percent agree that is one major reason for high drug costs.

The American people understand that pharmaceutical research and development is not inexpensive.  Europe used to lead the U.S. in drug development, until the effects of using price controls in their socialized healthcare systems finally caught up.  In 1990, $16.7 billion was invested in biopharmaceutical research.  At that time, European countries contributed 59.2 percent and the U.S. contributed 40.8 percent.  The Europeans implemented price controls in the 1980s and 1990s and that led to a shift in pharmaceutical investment to the U.S.  By 2005, the U.S. was contributing 53.1 percent and the Europeans were contributing 46.9 percent.  In 2017, of the $95.7 billion invested in biopharmaceutical research, the U.S. contributed 58.3 percent and Europe contributed 41.7 percent.

When the public learns that government negotiation really means government interference and control over the types of pharmaceuticals people will have access to, along with less innovation, opinions change rapidly and dramatically.

As Congress debates the $3.5 trillion human infrastructure bill and looks for pay-fors, do not be deceived.  The American people will pay dearly for this spending monstrosity should it be signed into law through higher taxes, inflation, slower economic growth, and less innovation.

What is a trillion?  Go back in time a billion seconds and you'd be in 1987. Go back a trillion seconds and you'd be around 30,000 B.C.