The Folly of Targeting Big Pharma
The biggest driver of rising health-care spending is the cost of labor, not drugs.
Editor’s note: While this story focuses on Hillary Clinton’s remarks about prescription drug pricing, Bernie Sanders, Jeb Bush, Ted Cruz, Ben Carson, and Marco Rubio have also made statements criticizing drug pricing. We are recommending this story because regardless of which political party speaks, it is clear that U.S. healthcare costs is an issue major presidential candidates are addressing. This piece by Michael Mandel of the Public Policy Institute gives us more than sound bites and looks at several factors affecting healthcare cost to a greater degree than drug pricing does.
By Michael Mandel – Mr. Mandel is chief economic strategist at the Progressive Policy Institute and a senior fellow at Wharton’s Mack Institute for Innovation Management at the University of Pennsylvania.
Dec. 10, 2015 7:10 p.m. ET
An unfortunate refrain among Democratic presidential hopefuls is that rapacious pharmaceutical and biotech companies are driving up the cost of essential medications, bankrupting the health-care system, and depriving sick Americans of treatment. Hillary Clinton has honed her message to a nice sound bite: Drug companies that charge excessively high prices “are making a fortune off of people’s misfortune.”
A report released Dec. 2 by the Centers for Medicare and Medicaid Services shows a 12.2% increase in spending on prescription drugs in 2014 after an average 2% increase for the previous six years. As the CMS report clearly states, “the rapid growth in 2014 was due to increased spending for new medications (particularly for specialty drugs such as hepatitis C).” Yet the increase, combined with reports of drug companies attempting to jack up prices on existing drugs, has some calling for full-blown government price controls.
Mr. Mandel is chief economic strategist at the Progressive Policy Institute and a senior fellow at Wharton’s Mack Institute for Innovation Management at the University of Pennsylvania.
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