Author: Pacific Research Institute

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April 12, 2018 Price and Costs

Expenditures on prescription drugs grew 12.4 percent in 2014 and 8.9 percent in 2015. These eye-popping data are not representative of the long-term expenditure trend, however. Not only did the growth in prescription drugs expenditures slow to 1.3 percent in 2016, longer-term (between 2009 and 2016), the average annual growth in pharmaceutical expenditures was 3.8 percent while the average annual growth in health care expenditure was a faster 4.2 percent. Obviously, if the growth in pharmaceutical expenditures is less than the growth...

March 14, 2018 Innovation

Striking the right regulatory balance for pharmaceuticals is no easy task. On the one hand, policy should promote drug affordability by encouraging robust competition. On the other hand, policy should encourage future innovations by granting these drugs temporary market exclusivity. While these goals appear contradictory, the federal government’s drug approval process has reasonably balanced these competing interests for many years. This approval process is based on legislation passed in 1984 colloquially known as the Hatch-Waxman Act. One of the primary goals of...

March 12, 2018 Policy Proposals

Congress has undermined the Medicare drug benefit that millions of older Americans depend on – one of the few federal health care programs that's working well. The two-year federal budget deal passed recently shifts more of the program's costs onto drug manufacturers starting in 2020. In the process, the change eliminates one of the key features that has made the program – known as Part D – successful for over a decade. If the change stays in place, Part D could soon...

February 28, 2018 Policy Proposals

When it comes to the U.S. health insurance market, the adage about communist economics is apropos. In this instance, instead of being “they pretend to pay us, we pretend to work”, it is “they pretend to sell insurance, we pretend to buy it”. What we call health insurance in the U.S. is not insurance at all. In its simplest form, insurance is a financial transaction where an insurance company bears the financial risks associated with an unwanted event in return for...

February 7, 2018 Price and Costs

During Tuesday's State of the Union address, President Trump pledged to drive down drug prices. That's a worthy goal. And fortunately, the Trump administration is already pursuing it in a way that protects patients and encourages research and development. Many of the strategies that candidate Trump proposed on the campaign trail would have done more harm than good. Candidate Trump often agreed with Hillary Clinton and Sen. Bernie Sanders on drug prices. They all wanted to repeal Medicare Part D's "non-interference clause,"...

January 10, 2018 Policy Proposals

Once again, budget negotiators in Washington D.C. are scrambling to put together a cogent spending plan for the federal government. And, once again, as part of this last-minute scramble, Congress is considering ad-hoc budget gimmicks to pay for spending instead of budgeting within the government’s affordability constraint. Or, as President Reagan might have said, “there they go again”. Employing budgetary gimmicks and pay-fors is one of the many reasons the federal government’s fiscal spending is out of control, and many problems...

December 14, 2017 Price and Costs

According to the five-second rule, you can still eat your food that has fallen on the floor, so long as you picked it up within five seconds. Only, this common perception is bad advice. In reality, if a person eats food that has fallen on a dirty floor, he risks getting sick because it only takes milliseconds for bacteria to contaminate it. The five-second rule is a myth. The myth of the five-second rule exemplifies how common perceptions can often lead to...

December 12, 2017 Price and Costs

The Trump administration recently announced a $1.6 billion cut to the badly abused "340B" program, which forces pharmaceutical companies to sell medicines to hospitals that treat significant numbers of poor patients at steep discounts. A bipartisan group of senators -- including supposed fiscal hawks like Sens. John Thune, R-S.D., and Rob Portman, R-Ohio -- are trying to block the reform. That's disappointing. Hospitals are exploiting 340B to enrich themselves at the expense of poor patients. Their abuse of the program drives up...

December 11, 2017 Price and Costs

Tomorrow, the Senate Health, Education, Labor & Pensions Committee (HELP) will discuss a proposed alteration to Medicare. The proposal comes from a report released in late November by the National Academies of Sciences, Engineering, and Medicine. NASEM urges Congress to allow federal bureaucrats to negotiate Medicare drug prices directly with pharmaceutical companies. Currently, private insurance companies conduct these negotiations. The academies believe the federal government could use its bulk purchasing power to obtain lower drug prices for Medicare beneficiaries. NASEM is wrong. Giving the government negotiating authority would stifle...

December 7, 2017 Policy Proposals

President Trump's nomination of Alex Azar for secretary of Health and Human Services is encouraging news for free-market health reformers. Azar possesses precisely the combination of legal acumen, bureaucratic savvy, management experience dealing with a large workforce, and private-sector experience required to eliminate those parts of Obamacare that can be accomplished through administrative action. Azar's conservative legal credentials are impressive. He clerked for the late Supreme Court Justice Antonin Scalia. This alone suggests a healthy aversion to federal overreach — a welcome trait for a...

October 12, 2017 Price and Costs

Abraham Kaplan famously noted that if you, “give a small boy a hammer, he will find that everything he encounters needs pounding.” Put differently, solving problems requires the right tool, not the convenient tool. Congress should remember this wisdom in its upcoming deliberations regarding the cost of prescription drugs. The convenient tool when it comes to the health care system’s affordability problem is price controls. After all, the government can limit price increases in any part of the health care system...

October 10, 2017 Price and Costs

The U.S. health care system needs systemic reforms that comprehensively address the problems of declining quality and rising costs. Alas, beneficial systemic reforms will not be implemented any time soon. There are still opportunities for Congress to implement tailored reforms that can help address these problems in the near term. One such opportunity is reforming the out-of-control 340B drug pricing program (the federal drug discount program created under the Veterans Health Care Act of 1992). The intent of the 340B program...

September 20, 2017 Price and Costs

Imagine a pharmaceutical market designed by Lewis Carroll’s Mad Hatter. In contrast to almost every other market, he might begin by charging wholesale prices that are higher than retail prices. He would then make sure that the higher wholesale price goes, the lower retail prices can become. And finally, he would ensure that not everyone could purchase their medicines at the low retail prices – although the reason why would be convoluted and random. While we can be certain that the...

September 13, 2017 Policy Proposals

Effective health care reforms must reduce the excessive costs imposed by frivolous lawsuits. Studies have shown that medical tort reform could reduce total health care premiums between 1 and 3 percent. As estimated by the American Action Forum, this could mean “roughly $15 billion” in savings from effective (but partial) medical tort reform. Given the desperate need to bend the health care cost curve, implementing medical tort reforms that rein in over-zealous lawyers should be a no-brainer. But then again, this...

September 11, 2017 Price and Costs

The refrain that pharmaceuticals are driving the health care affordability problem has been repeated so often that it is becoming an illusory truth – people believe it to be true simply because they have heard it repeated so often. Obviously, repeating the same incorrect statement over and over again does not make it so. It does squander valuable time as legislatures continually consider bills with no hope of improving the quality, or reducing the costs, of health care. For instance, California is...

July 26, 2017 Innovation

Disincentives plague the U.S. health care system, driving costs higher and the quality of care lower. Improving health outcomes requires reforms that remove these disincentives. With respect to health insurers, this means returning payers to their proper role of providing effective risk management services to patients. In contrast to other insurance markets, health insurers degrade their ability to cover medical emergencies because they cover the costs of routine expenditures that are not risks in the true sense of the word. If other...

July 21, 2017 Price and Costs

The drama of “repeal and replace” resembled an unfunny version of a Monty Python skit, continuously claiming that it was “not dead yet”, and even that it was “getting better” only to be put out of its misery in the end. The end of repeal and replace will not end the push for health care reform. There are simply too many problems that must be addressed – one way or another. One of these issues gaining traction is the growing push...

June 6, 2017 Policy Proposals

Tweaks do not turn bad regulatory proposals into good ones. Yet, with only minor modifications, Congress is once again considering the CREATES Act (Creating and Restoring Equal Access to Equivalent Samples Act of 2017), and its close cousin, the FAST Act (Fair Access for Safe and Timely Generics Act of 2017). Regulatory analyses quickly become detailed, and, frankly, quite boring. However, as the size and scope of the regulatory burden continues to grow, so does the negative impact on our economic...

May 17, 2017 Policy Proposals

In a unanimous and bipartisan vote, Arizona’s legislature passed the Free Speech in Medicine Act, which was signed into law about two months ago. Passing anything with bipartisan support is noteworthy in today’s hyper-partisan environment. Passing a bill with such important and positive implications for patients, even if the law is more symbolic than meaningful, is remarkable. Perhaps even more remarkable, the U.S. Congress now has an opportunity to replicate Arizona’s success at the federal level via the Medical Product Communications...