Today, Johnson & Johnson, Merk and Bristol Myers Squibb are testifying in front of the Senate Health, Education, Labor, and Pensions (HELP) Committee. Listening to what the drugmaker executives have to say about medicine prices would ordinarily be a valuable exercise. But under the proverbial interrogation lamp of HELP Committee Chairman Bernie Sanders (I-Vt.), the proceedings will be more akin to the Salem witch trials.
The committee hearing is set to focus on price discrepancies of pharmaceuticals sold in the U.S. compared to other countries. Democrats will argue that Americans pay more at the pharmacy counter because of “greedy drug companies.” The medicine cost disparity is undoubtedly eye opening. But vilifying the drugmakers alone is naive.
Drug costs in several foreign countries are manipulated by heavy-handed government price caps. It’s a hallmark of socialized medicine in Europe as well as with our neighbors to the north. And patients in these types of state-run systems pay the price. Access to revolutionary medicines can be limited and products are often rationed because mucking up the free market creates a gap between supply and demand.
In contrast, Americans have access to the most innovative treatments, therapies and vaccines in the world.
Rather than importing socialist ideas, the committee’s time would be better spent advancing existing policy proposals that will address inflationary pressures for medicine while keeping the innovation pipeline intact. The key should be to foster more competition. Targeting bloat that is triggered by an anti-competitive environment is a step in the right direction. And it’s an idea that attracts bipartisan support.
The drug supply chain is currently dominated by three middlemen—called Pharmacy Benefit Managers (PBMs)—that control 80 percent of the prescription drug market. These entities are the doorkeepers between the pharmaceutical production lines and consumers. And the lack of competition means these three giants enjoy considerable leverage to raise medicine costs for patients.
Policy proposals already introduced in Congress would help to curb the questionable behavior of bad apple middlemen—lowering drug costs for patients and opening the industry up to more competition. There are dozens of other, smaller PBMs that — if provided with an even playing field — can help keep prices under control.
The Lower Costs, More Transparency Act is legislation that passed the House at the tail end of 2023 that would shine a spotlight on the drug supply chain—transparency that will help push costs down. Meanwhile, other bills take aim at adverse incentives within the large PBM business model.
Under the current system, the dominant middlemen make bigger profits off more expensive medication and are therefore motivated to push the products onto patients. Their size means they can significantly manipulate doctor prescribing patterns. Proposals like the Delinking Revenue from Unfair Gouging Act would help reset motivations to encourage more affordable, generic alternatives.
The HELP Committee hearing is unlikely to advance constructive policies that will effectively lower drug costs for Americans—that is without creating similar consequences to those associated with European-style socialized medicine. Instead, lawmakers should push existing bipartisan proposals that target backwards incentives and foster patient choice within the drug supply chain.
Dr. Tom Price served as the 23rd U.S. secretary of Health and Human Services and is a senior healthcare policy fellow at the Job Creators Network. Elaine Parker is the president of the Job Creators Network Foundation, which manages the HealthcareForYou.com policy reform framework.