Last week, Hillary Clinton released her drug affordability plan, vowing to “demand lower drug costs.” Piggybacking off the public outrage from Turing Pharmaceuticals’ proposed 4,000 per cent increase of drug Daraprim, Hillary’s plan included capping out-of-pocket drug costs at $250 per month and permitted the importation of drugs from other countries where price controls are already in place.
These two proposals would be a disaster for medical innovation and the drug market. In fact, both have been suggested and rejected time and time again in Congress because they are bad healthcare policy and bad for the free market.
In a tweet, Clinton argued “if the medicine you need costs less in Canada, you should be able to buy it from Canada—or any country that meets our safety standards.” On its face, this probably sounds like a reasonable proposal, but it demonstrates a fundamental misunderstanding of the markets, and the importance of protecting innovation.
If Clinton had her way, consumers would not only be importing medicine, but also the price control of the country of origin. In many countries, price controls give supposedly cheap medicine, yet there is a hidden cost of innovation.
Already, the razor-thin profit margins means there is little left over for drug companies to finance new research and development. This is made worse by the prohibitively high R&D costs – it costs innovators an average of $2.6 billion to develop a new prescription drug, in part due to FDA over-regulation.
In a world of Hillary Clinton-style price controls, companies will be squeezed until they have no money left for innovation. If anything, the 4,000 per cent price increase that so outraged Hillary last week will become more common as drug companies look for ways to make enough revenue to re-invest in new innovations.
This plan may well work in a world of free trade utopia with no market-distorting price controls. But in the real world, her proposal is closer to unilateral disarmament.
Clinton’s other proposal – a price control on drug costs – would artificially lower the price of medicine here in the US. But the same problem exists as her other proposal, it distorts prices and prevents the free market from regulating supply and demand. As a result, the next miracle cure may never get discovered.
Clinton often accuses Republican politicians of being stuck in the past. But under her drug “affordability” plan, medical innovation will be forever stuck in the past for future generations.