Trump’s Drug Price Control Orders Are Bound to Backfire
At a White House gathering last Friday, President Trump announced four new executive orders intended to restrict the ways pharmaceutical companies set the price of prescription drugs. He signed and issued three that day and promised to issue a fourth if drug industry representatives don’t agree to massive price controls at a meeting tomorrow.
Seemingly oblivious to the fact that just eight days earlier he staged a highly publicized press conference to explain how regulation often does more harm than good and portray himself as a slasher of federal red tape, Trump boasted Friday about adding to that burden. But, just as the president often warns, those new rules are likely to backfire. They may produce modestly lower prices for some patients in the short term, but everyone will bear the burden of higher prices and fewer treatment options in the long run.
He adopts Biden-like controls that would harm U.S. innovation.
President Trump’s decline in the polls is getting more expensive by the day. The next virus spending bill will cost trillions, and late Friday the President made a pitch for seniors with haphazard executive orders to lower drug prices. His prescription is akin to what Democrats are offering: more government control.
“I’m unrigging the system that is many decades old. We’re doing something that should have been done a long time ago,” the President said at a press conference. “Previous administrations did nothing—absolutely nothing—as drug lobbyists, special interests, and foreign countries freely ripped off our citizens.” Did Bernie Sanders ghost write his remarks? …
Mr. Trump’s drug-pricing orders are a me-too Democratic plan.
Here’s How Trump Should Address the High Cost of Prescription Drugs
… If President Trump wants to bring down drug prices, he should avoid new layers of regulations and controls that will only make matters worse, and focus on bringing consumer-driven market forces and competition to this broken system. … Here’s a solution: stop focusing on trying to control drug prices, and start paying attention to who’s paying them. Tax and regulatory policy, such as the exemption for employer?provided insurance or mandated?benefits laws, have led to a third party—often the government—paying the vast majority of medical bills. With the consumer out of the loop, costs to the third party — and consequently premiums — continue to rise.
Sally Pipes: Trump’s drug pricing executive orders harmful to patients — will hinder development of new drugs
The coronavirus pandemic has demonstrated we need more medical innovation
The International Pricing Index is the worst offender in the three executive orders. The index links the prices the U.S. government pays for prescription drugs to the lower prices Britain, France, Canada and other developed nations pay for the same drugs.
Governments in these countries forcibly cap drug prices. By tying U.S. drug prices to those overseas, President Trump is effectively importing other countries’ price controls. Those price controls will deprive pharmaceutical researchers of the revenue needed to fund cutting-edge development of new drugs that could improve and in some cases save the lives of millions of patients. …
For drug companies and their backers to continue funding research and development, they need some level of assurance that their high-risk investments could pay off.
President Trump’s executive orders render such assurance impossible. Price controls could reduce drug companies’ revenue by as much as $1 trillion over a decade. As a result, up to 15 fewer new drugs could make it to market over that period, according to an analysis from the Congressional Budget Office.
Dr. Theodore Bolema is founding director of the Institute for the Study of Economic Growth at Wichita State University and member of the Department of Economics at Wichita State University. On November 8, 2019 he spoke at the Wichita Pachyderm Club on the topics of net neutrality and regulation of the internet. View below, or click here to view at YouTube. Video production by Paul Soutar.
Wichita offers special regulatory treatment for special circumstances, widening the gulf between the haves and have-nots.
The Wichita Eagle reports that part of what the City of Wichita is offering to Cargill as an inducement to stay in Wichita is regulatory relief.1 In particular:
The city has offered smaller incentives to Cargill as well, including an ombudsman.
[Wichita assistant city manager and director of development Scot] Rigby called the ombudsman something of a project manager.
“They’ll just call one person,” Rigby said of Cargill’s dealings with the city. “It’s a way to eliminate … a business trying to figure out, how do I get through the labyrinth of city processes?”
Rigby said the city has done this with other companies, such as Spirit AeroSystems and JR Custom Metal Products, and would do it for any company with an expansion or project that needs streamlining.
He said the city also is committed to work with the state and the Greater Wichita Partnership to create a talent recruitment position that could help Cargill and other companies recruit employees at all levels.
The city has said it would offer a 15-day turnaround instead of the customary 30 days for plan review and permits, along with a 50 percent reduction in plan review, utility and building permit fees.
Let me repeat the highlights:
labyrinth of city processes
streamlining
15-day turnaround instead of the customary 30 days
50 percent reduction in … fees
All of this is an explicit admission that City of Wichita regulations are burdensome. If not, why would the city devote time and expense to helping Cargill obtain relief from these regulations?
Further: Why do we have these regulations? If the purpose of the regulations is to protect people from harm, how can we relax or streamline them for the benefit of a few companies? Wouldn’t that expose people to the harm the regulations purportedly prevent?
What’s even worse is this: Cargill is a large company with — presumably — fleets of bureaucrats and lawyers trained to deal with burdensome government regulation. These costs can be spread across a large company. Meaning that Cargill can afford to overcome burdensome regulations.
What about the small companies that don’t have fleets of bureaucrats and lawyers? That can’t spread the costs of burdensome regulation across a large volume of business? What will the city do for these companies? This is especially important because the spirit of entrepreneurship the city wants to cultivate is most commonly found in small, young, companies. The type without fleets of bureaucrats and lawyers.
Well, the city says it would do for any company what it is doing for Cargill.
Except: How are companies supposed to know to ask for regulatory relief, streamlining, and a discount on fees?
And is it equitable to offer special companies special regulatory relief when it is not readily available for all?
Last year Kansas Policy Institute, in collaboration with the Hugo Wall School of Public Affairs at Wichita State University produced a report titled “Business Perceptions of the Economic Impact of State and Local Government Regulations.”2 On the city’s offer of special treatment to one company, KPI Vice President and Policy Director James Franko commented:
This bears out one of the key findings from a paper we did with WSU’s Hugo Wall School: Companies want transparency and simplicity in the local regulatory environment. Businesses are not as concerned about the regulation themselves as they are in navigating what the city admits is a “labyrinth” of regulations and processes.
The regulatory process should be simplified for all businesses, not just a few. Hopefully there is a realization that an “ombudsman,” or better yet a transparent, straightforward regulatory regime, should be available to anyone wanting to start or grow a business in Wichita.
Instead of the city offering regulatory relief on an as-needed, as-requested basis, why not simplify and streamline regulation for everyone? That seems to make a lot of sense. But if you were a city politician or bureaucrat, this isn’t in your best interest. If regulations are burdensome, and you — as a bureaucrat or officeholder — can offer relief, then you have power. You become important. You have the ability to grant favors and make people feel special.
But if regulations were streamlined and reformed for everyone as the city will do for Cargill, then bureaucrats and politicians would not be so powerful and important. But the people would be more free and prosperous. Think about that trade off.
An interview with James Franko of Kansas Policy Institute on the topic of regulation is on WichitaLiberty.TV here.
An often unappreciated mechanism throughout the Kansas budget severely limits the ability of legislators and governors to adapt to changing state priorities. A new paper from Kansas Policy Institute explains.
Federal Rules Serve as “Worms” Buried in Promises of “Free Money”
Mandates remove state control of budgets, exemplify increasing federal overreach
July 30, 2015 — Wichita — An often unappreciated mechanism throughout the Kansas budget severely limits the ability of legislators and governors to adapt to changing state priorities. These Maintenance of Effort (MOE) requirements are highlighted in a new paper by Kansas Policy Institute and is authored by former state budget director Steve Anderson. MOE stipulations force state and local governments to maintain a constant level of funding for several federal grant programs, most notably Medicaid and the Elementary and Secondary Education Act, two major components of Lyndon Johnson’s “Great Society;” in FY 2014 these two programs accounted for over two-thirds of Kansas general fund expenditures.
Dave Trabert, president of Kansas Policy Institute, offered the following in conjunction with the release of the paper, “Maintenance of Effort requirements are an end-run on the U.S. Constitution, which prohibits the federal government from dictating how states operate. The feds use MOE to create contractual obligations that effectively control large chunks of states’ budgets and limit legislators’ ability to make appropriate decisions for their constituents.”
Unfortunately, policy makers are bound by MOEs regardless of the state’s budget situation, changing priorities, or new-found efficiencies. A previous legislature can effectively tie the hands of future elected officials. Sometimes it is even agency bureaucrats who sign up for “free federal dollars” apart from the normal appropriations process with little legislative input.
Steve Anderson, author of the “Maintenance of Effort: The Federal Takeover of State Budgets” and current Senior Fiscal Policy Fellow with KPI, said, “The constitutional right of a state to control the appropriation of their citizens’ tax dollars is too often being abrogated by the federal government’s MOE requirements. This takeover of the state budgets is like an addictive drug from which withdrawal is painful. Unlike a drug, this addiction can be created by prior legislatures, governors or even bureaucrats. The pervasiveness of MOE goes to almost every function of state government.”
The report outlines several strategies that can be utilized by state governments to mitigate the negative effects of MOEs. One proposal may prove difficult with existing programs but brings some common sense to policy making moving forward — avoid federal funds as much as possible. Conversely, a similar recommendation would be that all new grant programs be approved by the state legislature.
In conclusion KPI President Trabert said, “MOE requirements are not about improving outcomes, but dictating how states operate. Until Congress puts a stop to this practice state legislators must say no to the promise of ‘free money’ from the feds and avoid the problems brought by MOEs.”
As our electric utility asks for a rate increase, let’s first ask that it stop blatant waste.
Westar, our state-regulated electric utility, is asking for a rate increase. As part of any increase, we ought to insist that the utility do a better job of controlling blatant waste.
The problem may not be solved soon. No one has much motivation to solve the problem. The city pays Westar a fixed fee for each streetlight. The use of electricity is not metered, at least as far as the city’s bill is concerned. So if the city notices the lights wasting electricity during the middle of the day, well, it’s of no cost to the city. The city is concerned that working with Westar to turn off street lights during the day may not be cost-effective, according to Ken Evans, the city’s director of strategic communications. That’s the attitude he expressed in a recent City of Wichita Facebook dialog with citizens. But the city has run a campaign asking people to turn off appliances like microwave ovens and alarm clocks when not in use. This saves a vanishingly small amount of electricity, and at a large cost in convenience.
Downtown Wichita, July 17, 2015, 11:18 am. At least five burning street lights can be seen.Westar, on the other hand, is a highly-regulated utility that operates much like a governmental agency. How strong is the profit motive to Westar? Not strong, it seems. Most individuals or private business firms would seek to reduce the waste that Westar seems unconcerned about.
But before granting Westar a rate increase, its regulators ought to insist that the utility work to control blatant waste. This may be the only way to get attention to this problem.
A forthcoming book by Charles Murray holds an intriguing idea as to how Americans can reassert liberty: Civil disobedience. Make the federal government an “insurable hazard.”
I think it’s a great idea. For an easy introduction to this concept, listen to the Cato Institute’s seven-minute podcast of Murray speaking about these ideas.
From the publisher:
American freedom is being gutted. Whether we are trying to run a business, practice a vocation, raise our families, cooperate with our neighbors, or follow our religious beliefs, we run afoul of the government—not because we are doing anything wrong but because the government has decided it knows better. When we object, that government can and does tell us, “Try to fight this, and we’ll ruin you.”
In this provocative book, acclaimed social scientist and bestselling author Charles Murray shows us why we can no longer hope to roll back the power of the federal government through the normal political process. The Constitution is broken in ways that cannot be fixed even by a sympathetic Supreme Court. Our legal system is increasingly lawless, unmoored from traditional ideas of “the rule of law.” The legislative process has become systemically corrupt no matter which party is in control.
But there’s good news beyond the Beltway. Technology is siphoning power from sclerotic government agencies and putting it in the hands of individuals and communities. The rediversification of American culture is making local freedom attractive to liberals as well as conservatives. People across the political spectrum are increasingly alienated from a regulatory state that nakedly serves its own interests rather than those of ordinary Americans.
The even better news is that federal government has a fatal weakness: It can get away with its thousands of laws and regulations only if the overwhelming majority of Americans voluntarily comply with them. Murray describes how civil disobedience backstopped by legal defense funds can make large portions of the 180,000-page Federal Code of Regulations unenforceable, through a targeted program that identifies regulations that arbitrarily and capriciously tell us what to do. Americans have it within their power to make the federal government an insurable hazard like hurricanes and floods, leaving us once again free to live our lives as we see fit.
By the People’s hopeful message is that rebuilding our traditional freedoms does not require electing a right-thinking Congress or president, nor does it require five right-thinking justices on the Supreme Court. It can be done by we the people, using America’s unique civil society to put government back in its proper box.
This week Kansas Policy Institute released a study of regulation and its impact at the state and local level. This is different from most investigations of regulation, as most focus on federal regulations.
The study is titled “Business Perceptions of the Economic Impact of State and Local Government Regulation.” It was conducted by the Hugo Wall School of Public Affairs at Wichita State University. Click here to view the entire document.
Following is an excerpt from the introduction by James Franko, Vice President and Policy Director at Kansas Policy Institute.
Surprising to some, the businesses interviewed did not have as much of a problem with the regulations themselves, or the need for regulations, but with their application and enforcement. Across industries and focus group sessions the key themes were clear — give businesses transparency in what regulations are being applied, how they are employed, provide flexibility in meeting those goals, and allow an opportunity for compliance.
Sometimes things can be said so often as to lose their punch and become little more than the platitudes referenced above. The findings from Hugo Wall are clear that businesses will adapt and comply with regulations if they are transparent and accountable. Many in the public can be forgiven for thinking this was already the case. Thankfully, local and state governments can ensure this happens with minimal additional expense.
A transparent and accountable regulatory regime should be considered the “low hanging fruit” of government. Individuals and communities will always land on different places along the continuum of appropriate regulation. And, a give and take will always exist between regulators and the regulated. Those two truisms, however, should do nothing to undermine the need for regulations to be applied equally, based on clear rules and interpretations, and to give each business an opportunity to comply.
On December 10 there will be a hearing in the Energy and Commerce Committee to review the Safe and Accurate Food Labeling Act. We will hear testimony from expert scientists and those with a wide variety of experiences. We will also hear from those who produce the safest food in the world here in America.
This legislation will make the following reforms:
Ensure that new innovations in food are — and always remain — safe by creating a mandatory process for all genetically engineered crops that requires an FDA safety review prior to their introduction into the food supply;
Empower the FDA to specify special labeling if these foods are found to be unsafe in any way, and;
Preserve the FDA’s 100-year management of food labeling and prevent a disruptive regulatory patchwork that will significantly increase the cost of food for families.
For GMOs, a patchwork of state regulations would be a nightmare
A complicated regulatory landscape for genetically modified foods would shift power to large food producers at the expense of small companies and innovative startups.
Have you ever seen a product that displayed a label that states: “This product contains a chemical known to the State of California to cause cancer and birth defects or other reproductive harm.” And notifying you that you should wash your hands after handling it?
In my case, it was a cable attached to a computer peripheral.
How is that that the State of California “knows” this product is harmful, but none of the other states or the federal government have such knowledge? And why should I — here in Kansas — be discouraged by buying a product and then be scared to use it, just because California believes it is harmful?
The answer is that California has a list of about 900 chemicals that it believes are harmful. If you want to sell a product in California, and if your product contains one of these, you must provide a warning label on your product.
Now, can you imagine the confusion that would result if other states had their own list of chemicals that they believe are harmful. It’s quite likely that each state would have a different list. Complying with the multitude of different harmful lists and labeling requirements would be a burden. It might be impossible — or very costly — to comply.
Today, we have similar potential for regulatory complexity cropping up in the form of state-based label requirements for foods that contain GMOs (Genetically Modified Organisms). Dozens of states are considering their own labeling requirements for food sold within their borders. It’s quite likely that each state would have a different set of labeling requirements. The complexity of complying with such disjointed regulations is costly and forbidding.
The proposed law does not prohibit voluntarily labeling.
What’s interesting is that opponents say this bill will create a new federal bureaucracy to enforce GMO regulations. I suppose that’s true. But it’s either that, or 50 states with 50 sets of regulations, all different. Cities could add regulations, too, further complicating the regulatory landscape.
Another observation: Critics of this bill say its supporters have “sold out” to the large food producer companies, Monsanto being mentioned most prominently. But it is large companies like Monsanto that are best able to cope with complicated regulations. Large companies have fleets of lawyers and compliance officers that can deal with burdensome regulation. And being large, these companies can spread the cost of regulation over a large sales volume.
But small companies, start up companies, and innovators don’t have lots of lawyers and compliance officers. Being small, they can’t spread the cost of regulation over a large sales volume. These are the companies that are most harmed by regulations like those that H.R. 4432 is designed to squelch.
It’s in the interest of large companies to have regulations that create barriers to entry to markets by new competitors. We often see companies lobbying to create such regulations. But H.R. 4432 will create a uniform playing field that is easier and simpler to navigate and obey.
Finally, markets have a remarkable ability to provide the products and information that consumers want. If a food producer senses that consumers want information about the ingredients in a product, they’ll provide it. Their competitors — if they see themselves disadvantaged — will also provide the information that consumers demand. The alternative is relying on 50 sets of government bureaucrats operating in 50 state capitals, plus ambitious city bureaucrats.
Last year Kansas Policy Institute, in collaboration with the Hugo Wall School of Public Affairs at Wichita State University produced a report titled “Business Perceptions of the Economic Impact of State and Local Government Regulations.”2 On the city’s offer of special treatment to one company, KPI Vice President and Policy Director James Franko commented:
Dave Trabert, president of Kansas Policy Institute, offered the following in conjunction with the release of the paper, “Maintenance of Effort requirements are an end-run on the U.S. Constitution, which prohibits the federal government from dictating how states operate. The feds use MOE to create contractual obligations that effectively control large chunks of states’ budgets and limit legislators’ ability to make appropriate decisions for their constituents.”
From the publisher:
The study is titled “Business Perceptions of the Economic Impact of State and Local Government Regulation.” It was conducted by the Hugo Wall School of Public Affairs at Wichita State University. Click here to view the entire document.
