Why Drug Price Controls Are Still A Bad Idea For Lawmakers To Consider

by Americans for Prosperity: The Biden administration’s “infrastructure” spending plan may call for dusting off a bad idea that, when last proposed in 2019, the Senate rightly rejected: drug price controls.

Of course, price controls on prescription drugs have nothing to do with infrastructure. But this is also bad policy, resting on the faulty assumption that quality, affordable health care can be simply mandated into existence by government fiat.

Such policies rarely work the way they’re intended. Drug price controls result in drug shortages, lower research and development spending by pharmaceutical companies, fewer drugs reaching the market, and longer wait times for drugs that do.

How do price controls work — and what affect would they have on our ability to get the medications we need?

Update: Read Americans for Prosperity’s statement that President Biden will reportedly not call for capping the price of prescription drugs but will request another $200 billion to permanently extend taxpayer subsidies that go to insurers offering health plans through the Affordable Care Act.

Price controls weakened Canada’s response to COVID-19
The United States has fully vaccinated over 81 million people, around a quarter of the population. Canada, meanwhile, has fully vaccinated just shy of 1 million people, a little over 2.5 percent of its population, meaning our northern neighbor is far behind much of Europe and South America.

Canada’s vaccination effort has been so disorganized that the U.S. Centers for Disease Control and Prevention now cautions Americans against travel to the country.

Canada didn’t get here overnight. Its lackluster vaccination effort is the result of longstanding policies that put the country at a stark disadvantage when it needed to procure shots.

Canada’s price controls are, in part, the culprit. They made it difficult for companies to ship the vaccines provided by Operation Warp Speed.

In effect, Canada priced itself out of the market for lifesaving shots.

That raises a question: Why was Canada so heavily reliant on the United States for vaccines? Again, price controls were part of the problem. Drug companies have been leaving Canada for decades because of its harsh regulatory environment.

To study how Canada’s price caps hollowed out the country’s pharmaceutical industry is to understand why the same policies would result in failure in the United States.

Why drug price caps wouldn’t work here
America’s large, resilient, and endlessly innovative pharmaceutical industry deserves credit for producing the drugs, therapeutics, and of course, vaccines we need to recover from the COVID-19 pandemic.

Unfortunately, the drug price caps called for in the president’s “infrastructure” package would make it more difficult for these companies to bring these medical marvels to market.

We’ve been here before. This same policy was proposed in 2019 by House lawmakers. The White House Council of Economic Advisers warned against implementing it, finding that:

• Drug price caps would cut pharmaceutical industry revenues by $500 billion to $1 trillion over a decade.
• In turn, drug companies would likely cut research and development spending by $75 billion to $200 billion during that period.
• The industry would produce as many as 100 fewer products over that period. If companies usually produce 300 products, drug caps would bring that number down to 200.
• The economic toll from such a policy would be disastrous. Americans would be less healthy and the country would be less economically productive. The Council of Economic Advisers estimates that price controls would reduce annual economic output by $375 billion to $1 trillion, around 10 to 30 times what the policy is projected to save.

In short, price caps on drugs would not only have a disastrous effect on America’s drug companies, but on every American in need of care, too.

Thankfully, there are better alternatives.

What Americans can get from a personal option



Creating additional barriers to medical care, we know, doesn’t work.

A smarter approach would be to give Americans a personal option for prescription drugs that creates a greater supply of available medicines. Lawmakers could do this in a few ways, including:

• Streamlining the U.S. Food and Drug Administration’s drug approval process so that new drugs are approved at the same rate of speed as the COVID-19 vaccines.
• Expanding health savings accounts for all so that every American can save and spend for prescription drugs, tax-free.
• Removing barriers that block access to generic versions of drugs.
• Allowing for more legal drug importation from other countries.

Tell lawmakers we don’t need a federal takeover of medicine. Americans need a personal option that puts patients first. Sign the petition.
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Americans for Prosperity

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