Should Drug Prices Be Capped?

Americans understandably want to pay less for medicines, and they are demanding government action.

More than three in four Americans want government to cap what drug companies can charge for certain medicines, according to a poll by the Kaiser Family Foundation. Fully 83 percent want the federal government to negotiate prices for drugs for Medicare patients.

But more government involvement would have serious and damaging side effects. Federal meddling contributes to making today’s most advanced pharmaceuticals more expensive for patients. Giving the government more power over pricing will cause costs to rise even higher.

Nonetheless, Democratic presidential candidate Hillary Clinton has announced a plan to go after “price-gouging” by drug companies and is proposing, among other things, federal legislation imposing a $250 monthly cap on how much patients with chronic and serious medical problems would spend on prescription drugs. This “solution” would manifest in higher premiums for everyone.

The Kaiser poll also finds that 86 percent of Americans want pharmaceutical firms to disclose how they set their drug prices, reflecting public distrust toward the industry.

What they would find is that the cost of developing new drugs is stratospheric. According to researchers at Tufts University, pharmaceutical firms spend an average of $2.6 billion and 10 years to develop a single new medicine. Just 15 years ago, the average cost of creating a new drug was “only” $800 million.

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About the author

Grace-Marie Turner is president of the Galen Institute, a public policy research organization that she founded in 1995 to promote an informed debate over free-market ideas for health reform. Full biography