Congress Should Just Say No to Drug Price Controls

Your Inside Report From Capitol Hill

"It" you put the federal government in charge of the Sahara Desert," Nobel economist Milton Friedman once quipped, "in five years there'd be a shortage of sand." Friedman's admonition is especially pertinent to the ongoing effort by Senate liberals to give federal bureaucrats a leading role in setting the price of drugs for seniors.

Their track record on this front, not surprisingly, is appalling.

Two years ago. Senate liberals, led by Majority Whip Dick Durbin (D.-I11.), sought to head off implementation of the new federal drug entitlement for seniors (not a bad idea, given that it's available to even the wealthiest seniors and adds trillions of dollars to our long-term debt). But they did this for the wrong reasons and pursued the wrong remedy.

Heavy-Handed Role

Durbin has bemoaned the absence of a heavy regulatory role for Uncle Sam. Left to negotiate freely, insurers that offer drug coverage under Medicare, he feared, would conspire with drug manufacturers to gouge seniors, and send the cost of prescription drugs under the program "through the roof."

The best way to contain those costs, Durbin argued, was a price control-mandating the price insurers could charge seniors for certain Medicare drug plans. He recently pushed legislation that would have instructed the secretary of the Department of Health and Human Services "to set a uniform national premium of $35 for the first year" and "to negotiate group-purchasing agreements" on behalf of seniors.

Happily, Durbin's legislation went nowhere. He and his colleagues quietly dropped the $35 price control on premiums. Last week, 41 Senate Republicans defeated a procedural motion to stifle debate and floor amendments on this bill, disappointing a coalition of 47 Democrats, Socialist Bernie Sanders (Vt.), six moderate Republicans, and Independent Joe lieberman (Conn.).

Raining on the liberals' parade is the fact that the competitive features of the new drug law have exceeded everyone's expectations. At $22 per month, the average premium for plans this year is more than 40% below the projected monthly cost of $37 and is actually lower than the average cost last year. To taxpayers, this translates into annual savings of $ 13 billion this year and has caused government bean counters to lower projected Medicare costs by $ 189 billion over the next decade. Satisfaction levels among seniors who have these plans, meanwhile, top 80%.

Now Durbin and his colleagues are pushing the second part of his legislation (requiring bureaucrats to interfere in negotiations between insurers and drug manufacturers). They justify the heavyhanded government role they covet by citing the drug program run by the Department of Veterans' Affairs. According to Sen. Daniel Akaka (D.-Hawaii), who chairs the Veterans' Affairs Committee, veterans get "better pharmaceutical care" than those in private or public hospitals, have access to more drugs than Medicare beneficiaries, and register higher levels of satisfaction than patients in the private health-care sector.

Not so. A comprehensive review of the drugs available to veterans by The Lewin Group, a highly respected firm that analyzes the health industry, found that the VA's drug formulary actually bars coverage for 106 of the 300 most widely prescribed drugs to seniors, including 30 of the 100 most widely used. The VA formulary also excludes many new and innovative drugs. According to a study by Columbia University Professor Frank Lichtenberg, the VA list includes only 19% of the drugs approved by the Food and Drug Administration since 2000.

Among the drugs not available: Lipitor (the most prescribed drug to seniors, rated the "best" anti-cholesterol drug by Consumer Reports), Verapamil SR (rated "best" by Consumer Reports to treat high blood pressure), and other widely prescribed drugs for conditions such as acid reflux (Nexium), enlarged prostates (FIomax), arthritis (Celebrex), osteoporosis (Evista) and bladder control (Detrol LA). The list of the 1OO most widely prescribed drugs missing from the VA formulary also includes four each to treat blood pressure, diabetes and cholesterol. Little wonder that one million veterans have voted against the VA's restricted formulary with their dollars, signing up with one of the Medicare drug plans.

This push for more government regulation recalls another prescient observation by Milton Friedman. "Many people want the government to protect the consumer," the great Nobel laureate observed, "A much more urgent problem is to protect the consumer from the government."

Mr. Franc, who has held a number of positions on Capitol Hill, is vice president of government relations at the Heritage Foundation. To send a question or comment, e-mail:

MichaelFranc@heritage.org

Copyright Human Events Publishing, Inc. Apr 23, 2007
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