Hooper and Henderson on Drug Prices
By David Henderson
Patients are heavily insulated from the costs of their care partly because of long-term efforts by policymakers and advocates on the political left. The Affordable Care Act was a notable exception to this trend and, according to the Kaiser Family Foundation, following the legislation’s passage, patients’ insurance deductibles have increased six times as fast as average wages. Presidential aspirant Hillary Clinton would insulate those patients more; her “solution” to the current drug price problem is to limit consumers’ monthly out-of-pocket costs for medications. This would counteract one desired effect of the Affordable Care Act encouraging drug consumers to economize–and would ultimately lead to higher drug prices. Patients’ insulation from costs makes them less sensitive to all medical prices, and this lack of sensitivity encourages companies to charge higher prices. If patients paid a larger share of prices (or even knew the prices), then health care costs–including drug prices–would increase more slowly or even fall.
This is from Charles L. Hooper and David R. Henderson, “Want Cheaper Drugs?” It appeared in the latest issue of Regulation.