At least no one can say we weren’t warned.
Several of the Democratic presidential candidates have said that if elected president, they would impose price controls on prescription drugs.
Well, to be fair, they didn’t say it exactly like that. Rather, they are using euphemisms like “increase competition” or “allow the government to negotiate prices with prescription drug manufacturers.”
Here’s a quick test for those of you on Medicare: Next time you go to see your doctor, ask how much “negotiating” goes on between your physician and the government over how much the government will reimburse for that visit.
Even if the candidates don’t say “price controls,” that’s what they mean. They want to make newer prescription drugs cheaper, more in line with the older generic drug prices; and they think price controls are the way to do it.
Of course, that distinction between “older” and “newer” is the real explanation behind the price differences. It’s true for virtually all technology. The “early adopters”—the first buyers of a new technology product—will pay more than those who buy the product after it’s been out for a while.
Consumers know how expensive the early flat-panel and high definition televisions were. But with time, and competition, the prices began to fall dramatically, even as quality rose. They still aren’t cheap, but they are affordable for the majority of Americans. The same is true with digital cameras.
We don’t recall seeing any of the politicians pandering to the TV watchers by asserting that if elected president, they would make sure big-screen HD televisions were affordable.
And just because the new technology is more expensive doesn’t mean the older technology is necessarily bad: it’s just older.
Yes, prices for other technology products often seem to fall sooner than prescription drugs—in part a reflection of the cost of research and development—but that may change as we continue to move toward a consumer driven health care system.
So don’t be fooled by the rhetoric just because it involves health care; all the same economic principles are involved. When the government tries to reduce prices, you can bet your hat the only things that will be reduced are access and quality.