Freedom Line Blog

Today, the House Energy & Commerce Committee holds a hearing entitled “Lowering Health Care Costs for All Americans: An Examination of the Prescription Drug Supply Chain” that offers another opportunity to advance substantive reform.

CFIF applauds the Committee, and members Brett Guthrie (R – Kentucky) and Morgan Griffith (R – Virginia), for their collective efforts on this issue of affordability.  In that effort, we also continue our own effort to emphasize the importance of avoiding destructive government price controls, which only serve to make lifesaving pharmaceuticals less available to Americans, not more available.  It’s also critical to maintain focus on ongoing reform in the pharmaceutical benefit manager (PBM) arena, which actually can bring improvement, as we’ve consistently emphasized:

For those unfamiliar, Pharmacy Benefit Managers (PBMs) amount to middlemen that control prescription drugs for millions of Americans.  A majority of Americans receive health insurance through employer plans or government programs such as Medicare, which in turn cover prescription drugs through PBMs.  Those PBMs negotiate with drug companies and pay pharmacies, but throughout the process determine the drugs that insured patients may obtain and at what cost.

The problem is that PBMs operate in such an opaque and complex manner that they’re able to inflate drug costs while claiming to be working to reduce them.  It has reached a point where even the Federal Trade Commission (FTC) is now investigating PBMs’ role in driving up costs for Americans.”

Another critical arena offering potential reform? What’s known as Section 340B:

At issue is Section 340B of the Public Health Service Act passed in 1992 to help hospitals – especially those serving low-income and uninsured populations – to purchase pharmaceuticals from drug manufacturers at significantly discounted prices.

In theory, those savings for hospitals should have translated into lower out-of-pocket prices for everyday patients by being passed along to them.

Since 1992, however, real-world practice has not lived up to that laudable Congressional intent.  As the number of participating hospitals and pharmacies has grown, oversight has failed to keep pace with the scale and complexity of the program.

As a result, hospitals and their partner pharmacies have increasingly exploited the 340B program in ways that bring significant revenue streams for themselves, but no demonstrable benefits for the consumers who were the law’s original intended beneficiaries.  Multiple studies examining the growing discrepancy have exposed how hospitals and their partners generate tens of billions of dollars each year from 340B drug sales.  Rarely, however, have those funds been passed on to patients in the form of lower drug prices or even reinvested into better patient care.

Outrageously, some hospitals even charged full prices to patients for pharmaceuticals discounted under the 340B program, and then pocketed the difference rather than pass them on to consumers as designed.  The federal agency in charge of administering the 340B program has highlighted those transparency concerns and an inability to accurately audit the program in practice.

Accordingly, since 1992 the 340B program hasn’t fulfilled its intended aspirations.  Instead of reducing drug costs for patients, it has too often incentivized hospital profiteering, distorted healthcare behavior and ultimately raised costs rather than lowering them.”

Our message is clear:  Keep up the positive work, and focus on reform where it works, while avoiding the catastrophic potential pitfalls of drug price controls, whether through so-called “Most Favored Nation” (MFN) or other iterations, or erosion of strong patent rights that make American pharmaceutical innovation the envy of the world.

Hollywood drama typically remains centered in sunny California and in our homes and theaters.

This week, however, offers a convergence between the entertainment industry and an opportunity for the Congress to assist the Trump Administration’s success on accelerating the U.S. economy through its deregulatory agenda.

Specifically, the U.S. Senate Judiciary Committee is conducting a hearing on the proposed Netflix-Warner Brothers transaction, and the overarching theme should remain how allowing the free market, open competition and American innovation offer the best path to job creation and economic growth.

In other words:  The federal government should avoid needless interference in a mutually beneficial transaction between private parties.

Throughout the Biden Administration, we witnessed the economic harm caused by excess government interference into the U.S. economy, and since President Trump’s return to office we’ve witnessed an astonishing rebound about which we’ve frequently commented.  Growth is skyrocketing, and that reflects the benefit of a lower-tax, deregulatory agenda.

With that in mind, the U.S. Senate and Congress more generally must maintain the humility to realize that the parties involved are in the best position to weigh competing offers in this transaction, not federal bureaucrats.

Today’s video and streaming marketplace continues to demonstrate the constant innovation and growth that reflect America’s free market principles in an ideal world.  From services like YouTube to TikTok to Amazon Prime to HBO to traditional network television and every other streaming service, there has never been more competition for American viewing choices.  And new innovations, services, bundles and viewer models arrive almost daily.

Accordingly, there is simply no intelligent argument to be made that the video and streaming marketplace suffers from lack of competition or threat of market concentration.

We take no side in the particulars of the proposed Warner Brothers transaction, and it’s not our business what private parties determine to be in their shareholders’ and workers’ best interests.  That’s for the private and free market to determine, not big government.  If Warner Brothers determines that Netflix offers the best opportunity to continue its legacy and boost value, that’s not for bureaucrats to suffocate on technocratic whim.  For whatever it’s worth, Netflix has committed to preserving content spending, as well as continuing to license Warner Bros. programming to other services and even to maintain Warner’s theater release focus.   In contrast, wiser market observers note that the competing Paramount offer would more likely mean job losses due to the more overlapping production logistics of Paramount and Warner Bros.

Regardless, the important point is that this is a matter for the free market, not government dictate.

Whatever one’s personal preference in terms of programming, or idiosyncratic or ideological favoritism toward any of the private companies involved in this proposed transaction, the best way for the U.S. Senate and the federal government generally to ensure a thriving entertainment marketplace and promote jobs and innovation and economic growth is to follow the medical adage of “First, do no harm”

Congress must let the free market work.  That’s how we’re achieving remarkable economic growth at the moment, and that’s the best way for it to assist the Trump Administration’s proven deregulatory, pro-market agenda.