Freedom Line Blog

In order to lower healthcare costs for all Americans, a pivotal and necessary realm to address remains health insurance.

It’s therefore appropriate that the United States House of Representatives Committees on Ways & Means and Energy and Commerce will hold a timely hearing this week with executives representing major U.S. insurance companies.

Currently, the health insurance industry remains highly concentrated while American consumers continue to pay higher and higher healthcare costs.  At a deeper level, 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) commenced an investigation of PBMs’ role in driving up costs for Americans.

That’s why this week’s hearing with insurance company executives is so important, and offers such a critical opportunity to make real, meaningful progress on the ongoing concern to American consumers.

It’s critical to emphasize that the answer to healthcare affordability doesn’t lie in counterproductive drug price controls or violating critical patent protections for pharmaceutical innovators.  That would do nothing to lower healthcare costs, and would instead only make critical lifesaving pharmaceuticals and healthcare innovations less available to Americans.

To improve consumer access and affordability, let’s achieve real reform where it matters – at the health insurance and PBM levels.

In our recent weekly Liberty Update commentary entitled “On Pharmaceuticals, HHS Contemplates Disastrous New Price Controls,” we explain how government price controls undermine intellectual property (IP) rights, stifle American innovation and ultimately punish consumers in the form of fewer new pharmaceuticals.  We therefore encourage the Trump Administration to rethink a toxic new proposal along those lines, and instead pursue a course more in accord with its generally excellent stewardship of our economy and markets to date.

In his latest weekly commentary entitled “Not Healthy to Be Naive,” John Stossel agrees, and in a nice blurb explains the real-world consequences of drug price controls:

[G]overnment-run systems save money by freeloading off American innovation.  American drug companies, funded by American customers, fund most of the world’s research and development of pharmaceuticals.  New drugs and devices are expensive, so sometimes in Britain, says Pope, ‘whenever a new drug comes on the market that can save lives, the government just doesn’t have the funds to pay for it.’

Patients, accustomed to accepting whatever government hands out, don’t even know about the advances available elsewhere.  Single-payer systems also save money by rationing care.  Hence the long waiting times for treatments declared ‘nonessential’ in Canada, Britain and, for that matter, at American veterans hospitals.”

Hopefully, the Trump Administration is listening and corrects course.