NCPA - National Center for Policy Analysis

Hillary's Campaign to Lower Drug Costs Is a Downer No Happy Pill Can Fix

September 27, 2016

NCPA Senior Fellow Devon Herrick writes for Townhall:

Drug prices have become a campaign issue accompanied by a plethora of bad ideas. Spending on prescription drugs has grown tremendously over the past few decades, mainly due to the increase in the number of diseases and conditions treated using drug therapy. The truth is: most drugs are dirt cheap! Only a small portion -- maybe 1 or 2 percent -- are rather costly.

Early in his campaign, Donald Trump came out with some bad ideas on how to lower drug prices, such as having the government negotiate drug prices for Medicare and importing drugs from abroad (that is: importing other countries' price controls). He has since ceded these populist talking points to Hillary in favor of free-market ideas. He now advocates getting government out of the way, allowing competition to flourish. He understands that bureaucratic red tape at the U.S. Food and Drug Administration often prevents competition from holding drug prices in check.

Hillary Clinton is another story. Candidate Clinton is competing with the political ghost of Bernie Sanders to see who can devise a more ridiculous solution to lower drug costs.  Clinton has adopted the populist "cap the copay" policy idea that aims to limit drug cost-sharing to no more than $250 per month. This proposal is mostly a red herring. Manhattan Institute Fellow Yevgeniy Feyman estimates a $250 per month cap on out-of-pocket drug spending would benefit only about 1 percent of patients taking drugs. Moreover, nearly half of the benefits would accrue to wealthier households; those earning more than four times the federal poverty level, while the costs would come out of everybody's pockets. Proposals to limit consumers' copays basically forces health plans to pass on the higher costs to all policyholders as higher premiums. A handful of states have tried this. Besides raising premiums, it also encourages higher drug prices.

Drug cost-sharing is not really a problem for most people. Most Americans belong to a drug plan that provides drugs for nominal copays.  Nearly 90 percent of the drugs Americans take are cheap generic drugs, and about 80 percent of prescriptions have copays of $10 or less. On average, Americans only pay for about 16 percent of their drugs out-of-pocket. Someone else (insurers, drug plans and employers) pays the rest. Yet, activist politicians are trying to take advantage of the perception that drugs are unaffordable and in need of their policy solutions.


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