How Big Pharma Paves the Way for Socialized Medicine

Posted: Jan 26, 2016 12:01 AM
How Big Pharma Paves the Way for Socialized Medicine

Vladimir Lenin once quipped that capitalists would sell communists the rope with which to hang them.

Judging by a fight presently brewing in Washington, pharmaceutical companies look more than willing to sell the poison pill that kills the commercial health care market.

Conservatives need no reminder that the favorite toy of Leftist agitators for socialized medicine is to trot out victims of high healthcare costs, while bemoaning the inhumanity of the system that permits their condition to persist. Those of us who favor a free market system generally point, quite reasonably, to a number of measures that actually provide the truly needy with aid to see to their medical needs.

Unfortunately, pharmaceutical companies are trying to  “reform” this statute out of the system, handing their Leftist opponents an entire new class of victims with which to justifiably impugn Big Pharma, and, by Leftist logic, the entire idea of a competitive market in healthcare. Never mind that the pharmaceutical market is one of the least free sectors of the American economy as it is.

So which measure is it that Pharma wants to derail, permitting the Left create this new parade of horribles? A little known provision of the Public Health Service Act known as 340B. The provision was signed into law, with bipartisan support, by the first President Bush, and requires that any pharmaceutical company that wants to sell to the Medicaid system must also offer its drugs at a lower price to a certain, select group of providers. These include nonprofit and public hospitals that look after primarily low-income people. Also in the program are rural providers, children’s hospitals, some cancer hospitals, and community health clinics.

This is a program that makes drugs affordable to literally every group of people who could get a bleeding heart liberal’s blood pumping extra fast: poor people, children, cancer patients, and the homeless. And the program is, according to a 2015 study by Dobson, Davanzo and Associates, highly successful: the hospitals it reaches care for almost twice as many poor people as non-340B providers.

Now, at first blush, conservative free marketeers might have a few reasonable concerns about the program. The thought of forcing companies to sell drugs at a lower price, or possibly forcing taxpayers to foot the bill for another regulatory program, is not the sort of thing that makes our flinty hearts beat faster. However, there is ample reason for conservatives to support this particular program, as they did when it was first passed in 1992.

For those free market purists who say no drug company should be forced to sell their drugs at a lower price than the market demands, I have some sobering information: The U.S. drug market is heavily skewed in favor of the pharmaceutical industry and hasn’t been free for decades. For example, even if we manufacture a drug in the states, once we’ve sent it abroad, it’s gone for good. Why? Because it’s illegal to import drugs, even drugs we already made. Needless to say, Pharma loves this, because it artificially decreases the supply of drugs, allowing them to hold Americans hostage to whatever price they want to charge. This is a much bigger violation of free market principles than 340B, which represents just two percent of the $374 billion American drug market.

In short, if you want a free market in healthcare, you’ve got an entire ocean of bigger fish to fry, almost all of which are being protected by Big Pharma.

Secondly, if you’re worried about taxpayer money being involved in this system, don’t be. Only a minuscule $10 million goes into this program, and that’s purely to pay for administration and oversight. The amount of public money that is spent to help struggling hospitals, or to subsidize medicines for the needy, is a big fat zero.

And finally, if your heart somehow bleeds for Pharma and you worry that this program is making the delicate flowers who bought and paid for Obamacare lose money, don’t. The drug prices mandated by 340B are, in fact, consistent with the much lower prices paid abroad – prices at which the pharmaceutical industry still makes a sizable profit.

In other words, short of pharmaceutical companies wanting to profit by price gouging even more than they already do, while still hiding behind the fig leaf of paying for research, there is absolutely no rationale for getting rid of this program. And indeed, to do so would be an exercise in crony capitalism that would give socialists like Bernie Sanders countless weapons with which to advocate for their fever dream of a single payer system. Remove this law, and you will soon see a parade of Dickensian littlest cancer patients making their way to a thousand press conferences by progressive democrats in service of socialism in healthcare.

Ronald Reagan famously said that the government’s response to profit is, “If it moves, tax it. If it keeps moving, regulate it. If it stops moving, subsidize it.” The 340B program does none of those things. It is not a tax or a regulation, because the companies that enter it choose to do so. It is not a subsidy, because no taxpayer money is spent to help keep drug prices low. It is simply good government – something that is in short supply these days. And as conservatives, we would be wise to preserve it.