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Coalition Warns Against Broadband Proposals

By Katie McAuliffeAmericans for Tax Reform

Photo Credit: Denny Müller

Americans for Tax Reform led a coalition with other center-right organizations flagging concerning developments in the infrastructure bill negotiations. Price controls and rate regulation; dramatic expansion of executive brand and agency authority; and government-controlled internet should never be on the table.

You can read the letter below or click HERE for a full version:

July 23, 2021

RE: Broadband Infrastructure Spending

Dear Senators:

We write to you today over some concerning developments in the bipartisan infrastructure negotiations on broadband. We are guided by the principles of limited government and believe that the flaws in the infrastructure framework go well beyond the issues discussed here. Nonetheless, our present aim is to advocate specifically against proposals that would enact price controls, dramatically expand agency authority, and prioritize government-controlled internet. 

The infrastructure plan should not include rate regulation of broadband services. Congress should not authorize any federal or governmental body to set the price of any broadband offering. Even steps that open the door to rate regulation of broadband services will prove harmful in the long run.  

Nor should Congress continue to abdicate its oversight responsibilities to executive branch agencies like the National Telecommunications and Information Administration. Giving NTIA unchecked authority to modify or waive requirements, renders all guardrails placed by Congress meaningless. There must be oversight of the programs to ensure that taxpayer dollars go toward connecting more Americans to broadband as opposed to wasteful pet projects. 

Historically, attempts by NTIA to close the digital divide through discretionary grants have failed, leading to wasteful overbuilds, corruption, and improper expenditures. The American Recovery and Reinvestment Act of 2009 created the $4 billion Broadband Technology Opportunities Program (BTOP) grant program administered by NTIA. From 2009, when BTOP was instituted, to 2017, at least one-third of all the reports made by the Inspector General for the Department of Commerce were related to the BTOP program, and census data showed that the BTOP program had no positive effect on broadband adoption. And this was with only $4 billion in taxpayer dollars. We cannot afford to make the same mistake with much greater sums.

Legislation must be clear and not create ambiguities that are left to the whims of regulators. While “digital redlining” is unacceptable, the FCC should not be allowed to define the term however it sees fit and promulgate any regulations it thinks will solve problems—real or imagined. Doing so would give the agency carte blanche to regulate and micromanage broadband in any way it desires. This would be an egregious expansion of FCC authority. Moreover, definitions and regulations could change whenever party control of the agency changes, leading to a back-and-forth that creates uncertainty for consumers and businesses. 

Legitimate desire to ensure that low-income Americans have access to broadband infrastructure should not be used as a smokescreen to codify aspects of the recent Executive Order on Competition, which should not be included in any bipartisan infrastructure agreement. Republicans fought hard to support the FCC’s Restoring Internet Freedom Order. Any legislating on the functions and deployment of Internet technologies must move as a standalone bill through regular order with committee review. These questions are far too important to shoehorn into a massive bill without rigorous debate.   

Any funding for broadband buildout must target locations without any broadband connection first, and this should be determined by the Congressionally mandated FCC broadband maps. Congress has oversight over the FCC and the FCC has already conducted several reverse auctions. Reverse auctions get the most out of each taxpayer dollar towards closing the digital divide. Areas where there is already a commitment from a carrier to build out a network, should not be considered for grants, and the NTIA should not be able to override the FCC’s map to redefine “unserved” and subsidize duplicative builds.  

Government-controlled Internet should not be prioritized in any grant program. With few exceptions, government-owned networks (GONs) have been abject failures. For example, KentuckyWired is a 3,000-mile GON that was sold to taxpayers as a $350 million project that would be complete by spring of 2016. Those projections could not have been more wrong.   More than five years past the supposed completion date, fiber construction for KentuckyWired is still “in progress” in some parts of the state and a report from the state auditor has concluded that taxpayers will end up wasting a whopping $1.5 billion on this redundant “government owned network” over its 30-year life. NTIA should certainly not encourage these failures to be replicated.

We appreciate your work to help close the digital divide and agree that access to reliable internet is a priority, however we should not use this need to serve as a cover for unnecessary

government expansion. Please feel free to reach out to any of the undersigned organizations or individuals should you have questions or comments. 

Regards

* individual signer; organization listed for identification purposes only


Now You See Me, Now You Don’t—A Magician’s Guide to Drug Pricing

By George LandrithTownhall Finance

You cannot have your cake and eat it, too. It is a tale as old as time. But apparently, with its latest “Most Favored Nation” executive order on drug pricing, the Trump administration has stumbled upon a solution to this conundrum.

Or so they would have you believe.

The entire phenomenon centers around the hotly contested Affordable Care Act (ACA), or Obamacare. On one hand, the Trump administration is litigating before the Supreme Court in favor of the entire law being struck down as unconstitutional. On the other hand, the administration would like to use an obscure provision within the very same law in order to implement its new drug pricing mandate.

Can you see the problem?

Before we can even discuss the merits of price controls and their implications for our healthcare system, simple logic should have dismissed this latest action when it was first proposed. If you believe a law to be unconstitutional and invalid, how can you then use that law to carry out a particular policy agenda? The numbers simply do not lie. And perhaps this is why this particular executive order stayed under lock and key until September 13th—nearly two months between its signing and when it officially went into effect.

If you still are not sold, that is OK. After all, the Supreme Court could very well uphold the ACA as constitutional. If that happens, it would be easy to assume that President Trump’s executive order would then be in the clear. Fortunately, these assumptions are far from accurate and there is plenty of policy and precedent standing in stark opposition to this executive action.

A “most favored nation” pricing model is an extreme form of international price indexing (IPI), where price caps on certain drugs are put in place based on an average price obtained from a select group of other countries. These arbitrary price controls would have devasting effects on our access to groundbreaking drugs. The U.S. would be basing its drug market off of Europe, where socialized, restricted medicine is the norm. And such an approach exceeds the statutory authority of the executive branch. Under basic constitutional separation-of-powers principles, “sweeping” and “very dramatic”—the president’s own words—changes to major federal programs must be authorized by Congress. To date, Congress has flatly rejected any form of international price controls. Period.

The executive branch hopes to carry out its ambitious plan through an obscure clause in the Affordable Care Act, whereby modest authorization for testing “pilot projects” in underserved populations is authorized. According to President Trump, however, this new order contains “the most far-reaching prescription drug reforms ever issued.” But an unprecedented new program that will disrupt the entire healthcare sector is a far cry from a modest “pilot project.”

Simply put, the authority to execute this administration’s latest drug pricing mandate simply is not there. The same administration is fighting to strike down the very law it is using for this order. Congress has already plainly rejected the international pricing model. And the ACA itself does not grant the statutory authority for such a measure in the first place.

Until recently, this administration had a good record on healthcare—fighting to protect American innovation and promoting measures such as rebate reform and price transparency. Why, then, reverse this approach in favor of dangerous and unconstitutional executive actions?

President Trump is at his best when he is fighting for America, and he must return to supporting our pharmaceutical innovators that will get us through the current health crisis. We must stop “global freeloading” off of American innovation and negotiate more favorable deals with foreign governments. We need them to contribute their fair share toward research and development costs for new treatments and vaccines that are changing the world. These are solutions that will lower drug prices.

The president is a dealmaker, and that is exactly what we need during COVID-19. America must leave the cake outside and return to the head of the table.


Trump’s RX Pricing Order Will Have Unintended Consequences

By George LandrithInsideSources

Trump’s RX Pricing Order Will Have Unintended Consequences

President Trump has signed an executive order that aims to tackle U.S. prescription drug spending, but won’t implement it until the public, including private sector drug makers, can comment.

The order pegs the prices of certain drugs covered by Medicare to the lower prices paid in other developed countries, whose governments impose strict price controls.

The order might save the federal government some money — at least temporarily — but at great expense to patients and long-term scientific progress.

History shows that adopting government price-setting inevitably stifles medical innovation and reduces patients’ access to lifesaving drugs. This move is particularly dangerous and baffling in the middle of a pandemic.

Trump is well-intentioned. But when it comes to healthcare policy, it’s not the thought that counts. Americans can only hope the president rescinds this order, which will have harmful long-term effects.

Right now, Medicare pays 80 percent more for drugs than government health insurers in other developed countries, such as the United Kingdom and Japan. So, the administration wants to tie Medicare reimbursements to the significantly lower prices in those countries.

It’s no accident that drugs are cheaper abroad. Many foreign nations have heavily socialized healthcare systems that regulate drug prices. If pharmaceutical companies don’t accept pitifully low reimbursement rates, foreign government officials simply ban firms from selling their medicines at all.

Pegging Medicare reimbursements to those artificially suppressed prices would, in effect, impose price controls here. That might have some superficial appeal — after all, who doesn’t like the idea of cheaper drugs — but price control schemes never end well.

Government price-setting invariably restricts patients’ access to novel therapies. Right now, 96 percent of all new cancer medicines invented worldwide between 2011 and 2018 are available in America. That’s because our country has a relatively free-market drug pricing system that gives firms a chance to earn back their research and development costs.

Contrast that with the United Kingdom and Japan, where patients have access to just 71 percent and 50 percent of those cancer drugs, respectively. In these countries, drug companies stand little chance at recouping their R&D costs and earning a profit on many drugs. So, they often stay away.

Even if drug companies do enter those markets, foreign patients often wait months — or years — to receive new drugs. While Americans typically have immediate access to breakthrough cancer therapies, patients in Japan wait 23 months, on average, after a drug’s initial launch before gaining access.

Imagine if the 44 million Americans on Medicare — 15 percent of the U.S. population — had to wait an extra year and a half before they could take a new immunotherapy. That horrific consequence explains why, in this case, most congressional Republicans don’t back the president on his executive order.

The administration’s plan would also decimate medical innovation. It takes several billion dollars and over a decade to create just one new drug. The existing pricing system incentivizes companies to make those research investments — and the results have been nothing short of miraculous. Cancer death rates have plummeted more than 25 percent over the last quarter-century, mostly thanks to new treatments.

In fact, in 2019, American life expectancy increased for the first time in four years. One of the key causes was better cancer treatments.

I applaud Trump’s effort to reduce drug prices. But there are ways to do so without bringing foreign price-setting to our shores.

He already got one way right. In the same ceremony, Trump signed another executive order to target middlemen in the drug supply chain called pharmacy benefit managers.  These negotiators set the prices for drugs that end up on insurers’ list of covered treatments and on the shelves of local pharmacies.

The instinct to reform the practices of PBMs was spot on. PBMs receive significant rebates from manufacturers for adding a drug to an insurer’s formulary. But they don’t disclose those rebates or use them to lower patients’ costs at the pharmacy counter.

Requiring them to pass along savings directly at the point of sale will help achieve the president’s desired reduction in drug prices without costing Americans access to lifesaving cures.

Additionally, the administration could stop the unfair trade practice of banning an American medicine unless it’s sold at an artificially low price. That would stop developed countries from benefiting off the backs of American taxpayers, who foot the bill for new drug development.

Government price-setting would snuff out future medical breakthroughs while limiting patients’ access to existing drugs. The savings aren’t worth the cost in American lives. Let’s hope the administration decides to reverse course on its new executive order.


The Marketplace Drives Prices Down and Quality Up

By George LandrithTownhall

Unexpected expenses are never welcome and no one likes a costly surprise. So it’s no wonder that there is a lot of talk in Washington and Congress about “protecting” patients from surprise medical bills. Current legislation — SB 1895 — sponsored by Senators Lamar Alexander (R-Tenn) and Patty Murray (D-Wash.) makes such claims. It sounds good until you realize that all the “protecting” talk is just that — talk.  Even worse, is that rather than protecting consumers, it will make things worse. 

The most common cause of a surprise medical bill is when a person uses a healthcare provider that is not in their insurance plan’s network of providers. While it doesn’t happen that often, it most typically happens in a hospital emergency room — either because the patient is not able to consent to care or because the patient received inaccurate information about insurance coverage.  

Insurance companies have contracts with healthcare providers (both doctors and hospitals) to provide medical services at pre-negotiated discounted rates. That makes them “in-network.” The “out-of-network” providers charge a price without any pre-negotiated discounted rates, meaning the out of network costs are greater. 

While it is true that most doctors are in most insurance networks and hospitals often have ways to shield their patients from higher costs, there are occasional gaps that remain. And while it is uncommon, it can be costly when it occurs. But despite their rarity, these circumstances are used by politicians to make us think they are proactively solving problems for our benefit. Sadly, they are doing nothing of the sort.  

There are a number of proposals currently under consideration in the halls of Congress to fix surprise billing, but they have a couple important things in common. In one-way or another, all of these pieces of legislation entrust the government with the power to set prices. This will impose heavy costs even if executed properly, an idea that is almost laughable given the government’s track record on reducing costs.

This reminds me of the Obama-Biden repeated promise that they had a plan that would save us all thousands of dollars every year and allow us to keep our healthcare plan if that’s what we wanted. Obviously, Obama and Biden failed to deliver on that promise. It was the lie of the year even as judged by liberal fact checkers. Literally, millions of Americans lost their preferred plans and virtually everyone saw their health insurance costs increase, not decrease, by thousands. 

So a healthy dose of skepticism about promises to fix surprise billing with government price controls is entirely justified. It should not be enough for politicians to repeat over and over the mantra that they’ve got the fix. We’ve seen this play before. It doesn’t end well.  

Government-imposed price controls skew incentives and reduce the availability of quality healthcare.  To make things worse, government-imposed price controls also reduce the likelihood of future healthcare innovations and slow the development of promising medicines and procedures. But the bad news doesn’t end there — current proposals shift more and more power to health insurance companies, rather than giving consumers more control over their own healthcare. 

Regardless of what their true motives were or are, the results we have witnessed in the last 50 years from politicians promising “fixes” has been that things end up costing a lot more than promised, and government gets more and more control. Those who can afford lobbying efforts may escape the costly impact of these government mandates. But rarely do these promised fixes on balance help the average citizen.   

The marketplace — and the negotiations that take place when you have two or more parties all trying to maximize the value that they receive — has a knack for providing high quality goods and services for the lowest possible prices. That is the process that has brought us smart phones that have more computing power than was used in the 1960s in the Apollo program. It’s also the process that allows consumers to own huge flat screen televisions at a cost of several hundred dollars. We need to harness that power and that drive to high quality and low prices in the medical arena.

Instead of continuing to empower government and those who can afford lobbyists to protect their interests, let’s try reforms that put economic power back in the hands of healthcare consumers. Let’s trust the marketplace to do what it does so well — boost quality and keep prices comparatively low. We trust the marketplace to provide us with food, housing, technology, and a thousand other things, why not our healthcare as well? 

Today, the average American eats better and spends a lot less to feed themselves than our great grandparents did. As a result, we have access to all manner of foods — something even kings didn’t have a few generations ago. Additionally, we work far fewer hours to obtain that food. As a result, we have more money for larger, more comfortable homes, nice automobiles, vacations, and hospitals — something average Americans in 1776 didn’t even dream about.   

So if we want to see more affordable and better quality healthcare available to us all — why not harness the power of the marketplace? Where’s the proof that government-run schemes produce the needed quality and low costs? In contrast, the marketplace has a strong track record. Let’s try it! 


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