Note the nostrum here….
One of Donald Trump’s few universally welcomed campaign promises was to do something about the prices of pharmaceutical drugs. Most Americans recognize that prices are too high, and are bothered by the rise of pharmaceutical price gouging…..
The key power is found in the “import relief” law — an important yet unused provision of the Medicare Modernization Act of 2003 that empowers the Food and Drug Administration to allow drug imports whenever they are deemed safe and capable of saving Americans money. The savings in the price-gouging cases would be significant. Daraprim, the antiparasitic drug whose price was raised by Mr. Shkreli to nearly $750 per pill, sells for a little more than $2 overseas. The cancer drug Cosmegen is priced at $1,400 or more per injection here, as opposed to about $20 to $30 overseas.
The remedy is simple: The government can create a means for pharmacies to get supplies from trusted nations overseas at much lower prices.
In other words Trump has the ability to administratively put a stop to the drug-price rape.
But let me point out that while this article is informative and points out a means by which Trump can irrespective of Congressional interference put a stop to the scam in one area of the medical system it ignores — intentionally — a much-larger and more-powerful hammer that every President has had available to them for the last 30 years and yet has refused to use.
The Executive has the power and duty to enforce the law. 15 USC Chapter 1, which is where The Sherman, Clayton and Robinson-Patman acts reside, is an extremely powerful body of law bearing on exactly the sort of conduct the entire medical system engages in daily.
Why is that body of law far more-powerful than any threat to legislate? Because those laws not only provide for ruinously-large fines they include prison time for the executives involved and since they already exist they cannot be blocked by Congressional inaction.
Fines are something that we know businesses simply incorporate into their cost of business and thus ignore. Witness Wells Fargo, which got caught breaking the law by adding on services that customers never ordered. That’s a serious violation of consumer protection statutes and yet nobody went to prison. In fact nobody was even indicted in that regard, but the company was fined. Did it matter? Not really. Sure, a few people lost their jobs including some executives but the fact of the matter is that measured objectively the company was unharmed and the people who were involved got away with what amounted to robbery by deception.
Why will this article go unanswered? It’s rather simple, really: If you simply enforce the law then you would cause health care spending to contract from it’s near-20% of GDP down to something approaching its historical average, which was 3%.
Let’s assume that we get 4%. That’s a 15%, roughly, contraction in GDP!
At the same time a whole lot of people who currently are employed but provide not one single minute of actual care to an actual person would either see their salaries drop precipitously or lose their job entirely. Here’s looking at you, medical coders, although certainly that’s not the beginning or end of it.
And what do we call that sort of economic contraction, even though it would be short-lived and soon reallocated into other areas of the economy?
I remind you the formal economic definition of “Depression” is a 10% decline in GDP from top to bottom. We would hit that metric in about an hour after the law began being enforced.
The challenge before both the Executive and the people, along with Congress, is that the path we are on not only is unsustainable (which has been pointed out by many, myself included, for decades) with regard to this spending we are out of time to deal with it. Like most areas of unsustainable things government’s inertia and lack of desire to do something that might (in this case, will) upset asset prices is to kick the can or simply ignore the problem entirely.
That’s popular but when the wall comes into view around the last corner if you still have your foot mashed on the accelerator with spending growth around 9% when tax receipts are flat to actually down you are asking for a crack-up of devastating impact.
The obvious bleating is that all these levered hospitals (nearly all of them; you don’t think they paid cash for all those nice glistening buildings, do you?) will go bankrupt. My answer is so what?
Do you really think there will be no doctors and no hospitals?
No, what will happen is that that nice empty hospital that goes bankrupt and shuts down is still sitting there with perfectly-functional operating rooms and beds. Someone will come along and buy it at 10 cents on the dollar. A week, or a month later, if the sign read Frobozz Hospital the word “Frobozz” will be gone but the “Hospital” part will be lit up and there will be doctors performing procedures and nurses caring for customers.
With the facility being bought for ten cents on the dollar and 95% of the administrators fired said hospital will operate at a fifth of the former cost, and thus price. With the law being enforced you’ll have a nice price list on the Internet and that hospital will have to compete for business, which it will do quite well at with its much-lower cost structure.
The hospital across town or across the county that didn’t go bankrupt will have to figure out how to gets its cost structure down to where that one is or it will go bankrupt too.
Is that bad? No, it’s good!
See, if that one goes bankrupt then the same process happens again. Once again someone will buy the bankrupt facility for pennies on the dollar and shortly there will again be doctors and nurses — but not many administrators — providing care to customers.
This is how markets are supposed to work and it is how they do work when you put a stop to the illegal monopolist and price-fixing games.
I love a good bankruptcy sale. Buying things at pennies on the dollar with the blessing of judicial oversight in such a process, or just before a forced-eviction is about to happen (because someone didn’t pay the rent!) is an awesome competitive thing. It drives down price and drives up quality for the dollar paid. It powers innovation. It powers productivity which is defined as doing more with less.
And it brings down price for customers which is good for everyone except the monopolists.
Its a process that plays out in markets every single day when the government actually enforces anti-monopoly laws and throws handcuffs on colluders, forcing their outrageous mob-like behavior to bet met with well-deserved criminal sanction.
And best of all, despite all the lobbying dollars spent in Congress there is exactly zero Congress can do to stop it since the laws required to bring about these changes are already on the books, have already been challenged and found valid all the way to the US Supreme Court and thus merely need to be enforced.
Story courtesy of Market Ticker.