President Joe Biden gave his State of the Union address on Tuesday and health care was a prominent theme. Among others, he called for a fix to unaffordable health costs. Kaiser Health News reported:
He dedicated an estimated four minutes to his efforts to hold down health care costs — namely prescription drug prices — and pointed a finger directly at Big Pharma. “We are taking on powerful infrastructure,” he said.
One problem with his rhetoric is that his solutions do nothing to create competition and little to hold down costs other than price controls. Furthermore, he identified drugs as an area where medicine is unaffordable but for most patients drugs are the most efficient method of treating illness. He failed to mention hospitals where nearly one-third (31%) of medical expenditures occur. By contrast, only 9% of health care expenditures are on prescription drugs. Of those, about 90% are generic and are very affordable. An additional 8% are brand name and can cost a little more, while 2% are specialty drugs that are break-the-bank unaffordable. So basically, President Biden is making a mountain out of a mole hill while ignoring the actual mountain. The following is what President Biden had to say:
Let’s finish the job this time.
Let’s cap the cost of insulin at $35 a month for every American who needs it.
This law also caps out-of-pocket drug costs for seniors on Medicare at a maximum $2,000 per year when there are in fact many drugs, like expensive cancer drugs, that can cost up to $10,000, $12,000, and $14,000 a year.
If drug prices rise faster than inflation, drug companies will have to pay Medicare back the difference.
And we’re finally giving Medicare the power to negotiate drug prices. Bringing down prescription drug costs doesn’t just save seniors money.
It will cut the federal deficit, saving tax payers hundreds of billions of dollars on the prescription drugs the government buys for Medicare.
Even Kaiser Health News thought that Biden’s rhetoric was a stretch, writing:
That’s a touch too broad. Although the Inflation Reduction Act will allow Medicare for the first time to negotiate prescription drug prices with manufacturers, the provision will not take effect until 2026. The initial group of negotiable drugs will be limited to 10 that year. More drugs will be added to the negotiation list each year.
The Department of Health and Human Services is barred from negotiating on prescription drugs in the Medicare program until they’ve been on the market for several years.
Biden went on to tout the oddly named Inflation Reduction Act, which the name itself violates truth in advertising. This following from the White House prepared remarks (although Biden is widely known to deviate from his speechwriters’ prepared remarks):
For example, too many of you lay in bed at night staring at the ceiling, wondering what will happen if your spouse gets cancer, your child gets sick, or if something happens to you.
Will you have the money to pay your medical bills? Will you have to sell the house?
I get it. With the Inflation Reduction Act that I signed into law, we’re taking on powerful interests to bring your health care costs down so you can sleep better at night.
You know, we pay more for prescription drugs than any major country on Earth.
For example, one in ten Americans has diabetes.
Every day, millions need insulin to control their diabetes so they can stay alive. Insulin has been around for 100 years. It costs drug companies just $10 a vial to make.
But, Big Pharma has been unfairly charging people hundreds of dollars – and making record profits.
We capped the cost of insulin at $35 a month for seniors on Medicare.
But there are millions of other Americans who are not on Medicare, including 200,000 young people with Type I diabetes who need insulin to save their lives.
Too many Democrats mistakenly believe affordable health care requires health insurance and that public subsidies make health insurance affordable. I have Obamacare that costs nearly $8,000 for an $8,000 deductible. That means I will be out more than $16,000 before my coverage provides any benefit. That is unaffordable, as are the prices I have to pay out-of-pocket before I meet my deductible. I believe it was Thomas Sowell who said (paraphrased) if something is unaffordable individually, it cannot be affordable collectively.
Like most SOTU speeches, it was a lot of empty rhetoric written by speechwriters who know nothing about the economics of health care. Where was the discussion about encouraging the Federal Trade Commission to take a tougher line against hospital consolidation? Where was the discussion about making it easier for doctors to practice without working for a hospital? What about enforcing price transparency and the No Surprises Act? Where was the discussion about allowing seniors to contribute to health savings accounts? For that matter, where was the discussion about allowing American families buy health insurance that meets our needs?