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Pelosi's Plan to Slash Drug Prices Will Backfire

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Better than what?

House Speaker Nancy Pelosi introduced legislation last month to lower the price of prescription drugs. That’s a worthy and achievable goal. Unfortunately, she gave a misleading explanation of how the law would work, obscuring its probable counterproductive effects.

Instead of pushing down prices by forcing drug companies to compete more vigorously, it would put them in the hands of government bureaucrats in a way that’s likely to restrict innovation and reduce access to many important medications.

Pelosi claims that her bill would allow drug prices to be “negotiated by Medicare.” Most accounts accepted this explanation, as for example the New York Times did in its Sept. 19 headline, “Pelosi’s drug plan would let U.S. negotiate prices of 250 medications.”

A more accurate headline would have read, “Pelosi’s drug plan would give the U.S. government the power to set the prices of 250 medications.” Government price-setting, not negotiating, is called for by the bill.


Here’s how it would work. Each year, the Department of Health and Human Services would identify up to 250 brand-name drugs that do not have a generic or biosimilar competitor. Insulin, which has seen large price increases in recent years and has been the subject of much attention, would also be included on the list. HHS would be required to “negotiate” prices for at least 25 drugs per year. Drugs would be selected based on their costs — taking into account both price........

© Bloomberg