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HealthZette

Pelosi’s Price Control Committees Will Destroy Research and Development into New Medicines

Opinion: Gov't would create a panel to weigh some combo of politics, bureaucratic inertia and left-wing economic ignorance

House Speaker Nancy Pelosi (D-Calif.) must be giddy: Her pet idea to establish government price control committees is gaining steam on Capitol Hill, while her willing accomplices in the media discuss the plan as some kind of middle-ground compromise.

She may have spent her life working for a vision of America that sickens you, but it wouldn’t be wise to underestimate her.

Pelosi did most of the heavy lifting on passing Obamacare, and she has a canny toughness that far too often has bested the Republican opposition, such as it is.

They’re calling it “binding arbitration” these days, but it’s the same old price controls to which the Left always turns. Market competition put a supercomputer in your pocket; the Left invents new ways to spin price controls.

Specifically, the government would establish a panel to weigh some combination of short-term, politically expedient thinking, bureaucratic inertia and turf wars, left-wing economic ignorance, and good old-fashioned corruption into deciding that a price for some drug is too high. (It’s two parts “Veep,” one part “House of Cards.”)

Once a price has been deemed too high, the drug manufacturer and the government would argue their case before a price-arbitrating panel (appointed and paid by the government).

Related: Trump Wants Results on Drug Prices, Not Cheap Theatrics

The panel would then render a price the government prefers to pay; the company would be legally required to sell its product at that price.

“Binding arbitration” is a go-to tactic for European single-payer states trying to figure out how to pay for all their promises.

Its primary “benefit” in that context appears to be the often years-long delays it introduces into the process. While the “negotiation” is going on (and on, and on), the government isn’t on the hook to provide the best new drugs for its subjects — er, citizens.

Germans get access to new drugs nearly a year after Americans do, and that’s on average. Most countries that employ “binding arbitration” are behind that. There’s simply no question from the empirical evidence that this proposal is associated with significantly reduced access to medicine.

The more insidious effect is difficult to measure, but it’s far more consequential: It significantly changes the risk profile for developing a new drug.

On average, it costs about $2.6 billion to bring a new medicine to market. That’s a significant amount of capital regardless of the context. People who are tying up that much money for years aren’t doing it for charity. They’re taking a calculated risk.

The types of people who decide how to invest billions of dollars are generally pretty good at assessing risk; otherwise they wouldn’t have billions of dollars. But it’s also well known that assessing political risk is among the most fiendishly difficult to quantify of all types of risk.

That kind of uncertainty is like kryptonite to capital intensive, long-term projects. The toxic effect would be exacerbated because the U.S. is the world’s most important drug market, and American companies bring a large majority of the new drugs to market.

This is a Pelosi proposal, which means one thing: Not only is it bad in the obvious ways, it’s bad in ways we haven’t even thought of yet.

As a result, the policy would discourage production of the very thing it’s supposed to make it easier to access, which is kind of like — well, how every other price control story has ever gone.

Meanwhile, the media are doing their best to portray something as un-American as government price control committees as some kind of bipartisan compromise. The trick, as seen in this Politico story, is to quote the back benchers that are to the Left of Bernie Sanders’ belly-aching about how it’s not enough. Surprise, surprise: The Leninists and the Stalinists are bickering again.

The occasion for this violence between them was a private meeting in which top Pelosi aides detailed the “binding arbitration” proposal to fellow Democrats. This brings me back to my original point: Pelosi must be giddy about this.

This is a Pelosi proposal, which means one thing: Not only is it bad in the obvious ways, it’s bad in ways we haven’t even thought of yet.

Republicans in the Senate should work to ensure that the House Democrats’ debate between price controls and “¡Viva la Revolucion!” stays academic.

Obamacare is bad enough. Try not to destroy the research and design pipeline for lifesaving new medicines on your watch, Congress.

Mike Daugherty is CEO and founder of LabMD, a cancer detection laboratory based in Atlanta, Georgia. He is author of
“The Devil Inside the Beltway: The Shocking Expose of the U.S. Government’s Surveillance and Overreach into Cyber Security, Medicine and Small Business.”