November 02, 2007

Last week, the House and Senate both introduced bills to create a national, government run drug plan for Medicare Part D, thus proving that there is no government program that can work so well - although Part D has had its problems - that Congress can't find ways to undermine it.

In principal, this sounds like market-friendly competition, right? After all, what's wrong with one more plan for consumers to choose from. The catch is that the government run plan will basically impose price controls on drugs - the companies are too dependent on the government for patents and FDA approval, and too vulnerable to the Congressional bully pulpit to withold drugs from a government run plan - and that will enable it to offer lower premiums to seniors.

For the industry, when the government "asks" for a price, it's an offer you can't refuse.

Over time, the Medicare run plan would siphon off seniors from privately administered plans, reducing profits to drug companies who supply vital medicines to seniors.

What's wrong with that? Lots. To start off with, it'll slow the pace of pharmaceutical innovation, leading to fewer new medicines even as tens of millions more Baby Boomers need more and better medicines for cancer, Alzhiemer's, diabetes, etc.

It may be good politics to bash the drug companies these days, but it's just plain bad for American health care. Competition works in Part D, and instead of finding ways to undermine market forces, Congress should be trying to improve them.

Posted by Paul Howard at November 2, 2007 01:26 PM

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