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Well, really it’s not just PhRMA, it’s the generic manufacturers, as well. Normally there is a special room deep underground below the capitol where ideas to control excessive prescription drug prices go to die. The drug industry casts a long shadow over policymaking in Washington regardless of which party is in control of the White House or Congress. But with rising voter concerns about prescription drug costs — fueled by a combination of expensive new drugs, price increases for old drugs, and insurance plans increasingly relying on high cost-sharing to hold down premiums – perhaps that is about to change. The Center for American Progress and both of the leading Democratic candidates for president are out with policy proposals to restrain drug prices. States are also trying to tackle the issue, with a number of states debating legislation to increase the transparency of drug pricing.
The drug industry is clearly feeling some heat and is trying to get on top of the debate, but even a PhRMA-sponsored poll showed only 51 percent of likely voters opposed to drug price controls. A number of commentators have suggested that the poll was probably biased and that support for price controls is actually much higher.
Does the drug industry have anything to worry about? Won’t any effort to control drug prices get bogged down in a divided and seemingly ever more dysfunctional Congress? Perhaps, but what is probably worrying industry most is rumors that HHS is looking at ways to use its existing regulatory authority to hold down drug prices. If the administration is seriously looking to use its existing authority, it could start by making sure any new trade agreements don’t undermine efforts in the US and internationally to hold down costs. On top of that, there are some ideas in the CAP proposal that could be implemented without legislation. Will the outrage over rising prices turn into serious remedies? It’s too soon to tell, but certainly this is a good time to be pushing.
More on Mergers: When No Is Not Enough
Insurance industry executives have been up on the Hill facing scrutiny over proposed mergers among some of the largest insurance companies in the nation. Unfortunately, the debate over the mergers is missing some essential elements. Would the mergers cause premiums to rise? Both economic theory and the available evidence suggest that the answer is yes. But if the mergers of insurers are blocked, while provider consolidations continue on, then premiums will also go up.
The fight about the insurance mergers is as much a fight between large special interests over a division of the spoils rather than something that will yield an outcome that will truly benefit consumers. You didn’t really think the AHA and the AMA were leading the charge against the mergers because of their concern about rising health care costs did you? (If so, I have this bridge in Brooklyn that you might be interested in buying…). Unless we are prepared not only to block both insurer and provider consolidations but also to unwind many that have already occurred, we are unlikely to achieve a decent competitive equilibrium in much of the country. Consumers may be better served by strengthening regulatory oversight over premiums and provider prices than by an effort to close the barn door after the horses have already left the stable.