Is Setting a Price on Drugs the Same Thing as a Price Control?
By David Henderson
An economist friend emailed me last night to ask me to sign a statement against the price controls on drugs that the Trump administration is proposing for Medicare.
I said no.
The reason is not that I am suddenly in favor of price controls. The reason is that what Trump is proposing is not price controls.
It’s simply the feds trying to get a better deal on Medicare. As I understand current law, if a drug is approved for use for Medicare beneficiaries, Medicare must pay whatever the drug company charges. Medicare has no legal power to negotiate a price. This doesn’t apply to Medicare Part D, as I understand it. The insurers involved in Part D are free to negotiate prices.
If the feds ran the DoD the same way as they do Medicare, they would have to pay for an aircraft carrier whatever the contractor wanted to charge.
Whatever is being proposed might be good or bad: I’m inclined to good. But whatever it is, it is not price controls.