Price controls don’t reduce costs, they simply make the targeted products less available.

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Want to find a rare point of intellectual consensus amid our stubborn ideological divisions?  

Just survey economists across the political spectrum on the merit of government price controls.  

Economist Austan Goolsbee, the affable defender of Obama and Biden administration economic policies and now president of the Federal Reserve Bank of Chicago, offers a perfect example.  Asked in a 2022 survey of economists to opine on the effectiveness of price controls, Goolsbee responded dismissively, “Just stop.  Seriously.”  

Price controls don’t reduce costs, they simply make the targeted products less available.  

Ignoring that rudimentary law of economics and even otherwise supportive economists like Goolsbee, however, the Biden administration pressed forward in making its drug price control scheme the law of the land.  

Now, Americans are already suffering the inevitable consequences.  

As detailed this month by the American Society of Health System Pharmacists, drug shortages in the United States have just climbed to a record high:  

Last summer, ASHP shared findings from our most recent survey of drug shortages and called for action on what was a near-record number of active, ongoing shortages.  

The situation has worsened since then.  

During the first quarter of 2024, ASHP and our partner, the University of Utah Drug Information Service, tracked 323 active shortages.  This is an all-time high, surpassing the previous record of 320 shortages in 2014.  All drug classes are vulnerable to shortages.  

After reaching that previous peak in 2014, drug shortages receded for several years but resumed their increase after 2021.  

That is not coincidental, as American Enterprise Institute (AEI) scholars Joseph Antos and Ge Bai point out.  “Government price controls,” they note, “are blunt instruments likely to be turned against consumers.”  That foreseeable process is already underway:  

Federal policies to control the prices paid by Medicare and Medicaid, which account for 40 percent of prescription drug spending in the U.S., significantly affect the supply chain’s ability to recover from a shortage.  If Congress wants to address shortages, it should look first at the government’s own pricing policies.  

Further aggravating matters, Biden’s price controls not only affect existing pharmaceuticals, but also the development of new ones going forward.  

Back in 2021 as the nation debated Biden’s drug price control proposal, economists at the University of Chicago warned of the likely consequences:  

The United States has far fewer restrictions on price than other countries, but the Biden Administration has announced their goal to lower drug prices through greater price regulation. …  [N]ew drug approvals will fall by 32 to 65 approvals from 2021 to 2029 and 135 to 277 approvals from 2030 to 2039.  These significant drops in new drug approvals will lead to delays in needed drug therapies, resulting in worse health outcomes for patients.  

Reaffirming the point made earlier about the consensus on price controls spanning the ideological spectrum, the United Nations World Health Organization (WHO) sounded the same alarm years earlier about the consequences of government price controls and intellectual property (IP) violations:  

[P]rice controls, combined with the threat of market lockout or intellectual property infringement, prevent drug companies from charging market rates for their products, while delaying the availability of new cures to patients living in countries implementing those policies.  

Intellectually lazy attacks against America’s pharmaceutical sector have become something of a politicians’ pastime.  The inescapable reality, however, is that our more market-oriented system has cultivated an unrivaled legacy of innovation and excellence compared to our supposed superiors across the industrialized world.  

To illustrate, America accounts for approximately two-thirds of all new drugs introduced worldwide, so we create twice as many new lifesaving and life-improving drugs as the rest of the world combined.  Additionally, Americans can access far more new pharmaceuticals than consumers in other advanced nations.  Of 270 new medicines introduced domestically between 2011 and 2018, only 52% of them were available to Canadians, 41% to Australians, 48% to the Japanese, 53% to the French, 64% to the British and 67% to Germans.  

Unfortunately, Biden’s government price control policies are already having a foreseeably negative effect on that longstanding legacy.  

The sooner those policies are reversed via the legislative, judicial or future executive branches, the sooner American consumers will be relieved from this economic lesson that we shouldn’t have had to re-learn.