The solution for a non-problem: High prescription drug prices

High prescription drug prices are indeed a problem for many people, but they could be a non-problem. Unfortunately, the proposed “solutions” don’t solve the real problem.

AARP repeatedly runs articles devoted to the idea that prescription drug prices are too high, with the primary culprits being the “greedy pharmaceutical companies.”

AARP even publishes this logo, to help you remember why we must end excessive drug prices.

Among the solutions proposed by AARP are:

1. Let Medicare negotiate drug prices
Using the clout of the program’s 57 million beneficiaries to bargain with pharmaceutical companies could certainly lower prescription drug prices.

Such a move could produce as much as $16 billion in annual savings. The Veteran’s Administration already does this.

2. Allow more drugs to be imported
The prices of brand-name prescription drugs are typically much higher in the United States than in other developed countries, but there are strict limits on when and how consumers can buy drugs from other countries.

Setting up a system to ensure the safe and legal importation of less expensive prescription drugs could help put pressure on drug prices and allow consumers to save on medications.

3. Create transparency in drug pricing
There is no way now to verify the claim by drug companies that high prices are linked to the costs associated with research and development.

The public has very little information about how drug companies set the initial price of a drug or decide on subsequent price increases.

4. Provide for easier drug comparisons
The public has no means of knowing whether a newly approved medicine is better than those already on the market.

Increasing the availability of research that compares the safety and effectiveness of drugs treating the same conditions would help create price competition and reduce spending on unnecessary or ineffective treatments.

5. Implement “value-based pricing”
Shift the United States to a system in which drug pricing is based on how well drugs work (“value”) rather than what the market will bear.

For example, a drug that cures a disease would be priced higher than a drug that doesn’t improve on existing treatments.

AARP suggests other approaches, too: The Barriers Blocking Cheaper Prescription Drugs. This article describes the actions pharmaceutical companies take to slow or prevent the sale of generic drugs.

And then there are the patent-related tricks pharmaceutical companies use to extend the already generous patents on successful drugs — tricks that involve meaningless chemical changes that restart patents.

Finally, AARP lets us in on such tidbits as the fact that most actual research is not done by the big pharmaceutical companies.

It is done mostly by federally-funded and charity-funded groups such as universities and other non-profits, and by small companies that are purchased by the major pharmaceuticals.

The Fiscal Times published a “Chart of the Day: Big Pharma’s Big Profits”
By The Fiscal Times Staff, November 12, 2018

Virtually all of the revelations and suggestions focus on this one theme: Drug prices are too high because the big pharmaceuticals make too much money.

The idea is that if we can find ways to cut “big pharma’s” high prices and exorbitant profits, Americans would benefit.

But pharmaceutical company “greed” is not the real problem

The real problem with high drug prices is not that the drug companies make too much money. The problem is that consumers pay too much money, often unaffordable amounts.

In our capitalist economy, profits are beneficial. Even “exorbitant”  profits stimulate the economy. It is profits that pay for economic growth and employment.

The solution for high drug costs is not to lower drug prices, and thereby cut drug profits, but rather to reduce the amount that consumers pay.

This can be accomplished with a comprehensive, no-deductible, Medicare for All, that includes Part D, the part that pays for drugs.

The federal government, being Monetarily Sovereign, can afford to pay for any benefits in any amount, without collecting a dime in taxes.

Unlike state and local governments, the federal government has the unlimited power to create dollars and the unlimited power to prevent inflation.

We have to forget about the fear or envy that the pharmaceutical companies “make too much.” The more money the federal government pays the pharmaceuticals, the more growth dollars are pumped into the economy.

(If it goes against our moral grain to see big pharma pocketing so many dollars, the government can do what Medicare already does with regard to hospitals, doctors, and medical procedures. It can set the maximum amount it will pay, and determine that any company accepting any Medicare payments will have to abide by those terms for all the drugs it sells, or not be able to receive any federal dollars.)

But why limit the federal spending that is necessary for economic growth? It costs us nothing and it puts dollar into all our pockets.

Bottom line: The real problem is not how much profit pharmaceutical companies make. The more federal dollars they receive, the more growth dollars enter the economy.

The real problem is not drug pricing.

The real problem is how much consumers pay. 

Comprehensive, no-deductible, Medicare for All could eliminate that problem.

Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell
Search #monetarysovereigntyFacebook: Rodger Malcolm Mitchell

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The most important problems in economics involve the excessive income/wealth/power Gaps between the richer and the poorer.

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.

Implementation of The Ten Steps To Prosperity can narrow the Gaps:

Ten Steps To Prosperity:

1. Eliminate FICA

2. Federally funded Medicare — parts a, b & d, plus long-term care — for everyone

3. Provide a monthly economic bonus to every man, woman and child in America (similar to social security for all)

4. Free education (including post-grad) for everyone

5. Salary for attending school

6. Eliminate federal taxes on business

7. Increase the standard income tax deduction, annually. 

8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.

9. Federal ownership of all banks

10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.

MONETARY SOVEREIGNTY