By Phil Kerpen
Americans are justifiably angry that we pay the highest prescription drugs prices in the world – anger President Trump tapped into on the campaign trail. The disparity exists because other rich countries use price control schemes, forcing American consumers to provide the returns on capital that justify the enormous research and development costs associated with bringing new cures to market; the rest of the world free-rides on our innovation.
The good news is that the Trump administration has been aggressive on the trade front in efforts to break foreign price control regimes; the bad news is that the Trump administration is also proposing to actually import foreign price control regimes into the Medicare program by adopting a payment formula that is pegged to foreign prices.
In its recent report "The Opportunity Costs of Socialism," the White House Council of Economic Advisers (CEA) looked at "the impact on medical innovation of the U.S. adopting European-style price controls" and found: "If M4A would entail the same experience with below-market prices as other countries with socialized medicine, it would reduce the world market size and thereby medical innovation, and ultimately mean that future patients would forgo the health gains that would have come from these forgone innovations."
It is remarkable that, just days later, Health and Human Services Secretary Alex Azar proposed setting prices for drugs in the Medicare Part B program, which are doctor-administered drugs, with a formula based on foreign price controls.
That would directly undercut the efforts of the U.S. Trade Representative to combat foreign price controls. A recent study by the Committee to Unleash Prosperity found that eliminating price controls in OECD countries would result in eight to 13 more drugs coming to market every year by 2030 and raise life expectancy in the United States by 1.1 to 1.6 years.
The U.S. Commerce Department has found that easing foreign price control regimes could, by increasing research and development of new drugs, result in more competition and lower prices in the domestic U.S. market.
Doing the opposite – imposing foreign price controls to the domestic market – would have disastrous consequences.
"Economists and policymakers have long recognized that research and development activity suffers from a severe free-rider problem," Kevin Hassett, now president Trump's top economist, wrote in 2004. "In the past, the U.S. market has been large enough relative to the rest of the world that it has been able to support research despite these intrusions. The evidence reviewed here suggests that there could be devastating effects should our policy environment change."
Importing foreign price controls in the United States would short circuit diplomatic efforts to break foreign price controls, both because they would lack credibility and because the politics would flip, as higher prices abroad would now translate directly into higher prices at home through the price index.
Far from solving the free-rider problem, U.S. adoption of foreign price controls would undermine the incentive to invest in research and development; there...
By Phil Kerpen
President Trump recently tweeted that he wanted to end subsidies for General Motors "including for electric cars." In this case the president's personal pique aligns with an opportunity to advance good public policy. One of most significant subsidies from which GM benefits – the $7500 tax credit for electric car buyers – is already scheduled to phase out as GM passes the 200,000 vehicle cap on the full credit, entering a one-year phase-out before the subsidy ends completely. It's a rare circumstance in which a government program could actually end just by Congress doing what it specializes in – doing nothing.
Unfortunately, while the House version of tax extenders leaves the cap in place, the Senate has been discussing lifting the cap and allowing subsidies to keep flowing to GM and Tesla, which has already reached the phase out. The president should make clear he would veto any legislation to lift the cap.
Democrats should support letting the credit phase out because it is a tax break for the rich. The Pacific Research Institute looked at the most recent IRS data and found that more than half of the electric car buyers claiming the credit make more than $200,000 per year and nearly 80 percent make more than $100,000. Just 1 percent make $50,000 or less.
They conclude: "the subsidization of EVs has some reverse Robin Hood impacts where tax dollars are taken from all households (including lower-income households) and given to wealthier households."
There is also a geographic dimension to the wealth redistribution. The most recent industry data shows that half of all electric vehicles sold in the United States were sold in California, which has its own lavish subsidies at the state level. In August, the most recent month with data available, 53 percent of electric vehicle sales were in California.
A September 2018 NERA Economic Consulting study looked at the economic impact of eliminating the cap, as some in the Senate have proposed and for which Tesla and General Motors have been heavily lobbying.
They found that the costs of lifting the cap outweigh the benefits, because lower gasoline costs are more than offset by the direct and indirect costs of subsidized EV infrastructure. The study finds total household income falling as a consequence of lifting the cap by $7 billion in 2020 and $12 billion in 2035, which is about $50 to $70 per household in lost income every year.
That's a cost of over $50 every year to middle-income middle-Americans to pay for subsidies for rich people in California.
As Tom Pyle recently explained in The Hill, the subsidy for electric vehicles was always meant to be temporary.
Orrin Hatch, the original sponsor of the bill, explained the logic behind the cap in 2007:
"I want to emphasize that like the tax credits available under current law for hybrid electric vehicles, the tax incentives in the FREEDOM Act are temporary. They are needed in order to help...
By Jon Decker
One of the great underreported stories of the midterm election was the decisive defeat handed to liberal activists wishing to enact grocery taxes in Washington State.
Voters in Washington – where statewide elections are typically dominated by Seattle-area liberals – approved a ballot measure that would ban local municipalities from enacting taxes on processed foods and beverages in a near-landslide 56 percent to 44 percent decision.
To make things more interesting, rather than accept the fact that Washington residents rejected the regressive nanny-state tax hike, liberals are in denial.
Here is the actual text of the ballot initiative that liberals are calling "deceptive":
"This measure would prohibit new or increased local taxes, fees, or assessments on raw or processed foods or beverages (with exceptions), or ingredients thereof, unless effective by January 15, 2018, or generally applicable.
Should this measure be enacted into law?"
As the text makes blindingly obvious, a "yes" vote banned local grocery taxes.
The sanctimonious outrage displayed by leftwing activists is both comical and revealing. Surely voters were too dumb to understand what this actually meant! It certainly couldn't mean that Washington residents just didn't want to pay more for the food or beverages they enjoy, or experience the sort of sticker shock that has taken place in Seattle.
The left seems to be having a hard time accepting their recent defeats, statewide in Washington or in Santa Fe, New Mexico – another location not generally known as a bastion of free market thought.
For members of the food police grocery taxes are necessary because people aren't smart enough to choose what groceries they buy, as Mike Bloomberg himself has helpfully explained.
And when voters decide at the ballot box to ban such taxes, it must be because those voters are not smart enough to read.
Regardless of how the Michael Bloombergs of the world attempt to spin this embarrassing ballot defeat, Washington and Sante Fe's ballot initiatives make clear that not everyone buys into liberals' self-righteous attitude towards the American consumer.
Sorry tax hikers.
Photo Credit: ...
By Phil Kerpen
President Trump has hundreds of unfilled presidentially appointed positions because Democrats have stalled the nominations process out as much as their diminished power in the post-nuclear Senate has allowed. But it is the Republican majority that has placed a total blockade on the usual safety valve for temporary appointments – the recess appointment power – by refusing to go on recess for the last two years. And with Democrats set to take the House and be in position to deny the Senate consent to recess starting January 3, there is a real possibility that President Trump will go an entire presidential term without being able to make recess appointments.
It has been nearly eight years since the United States Senate officially recessed – a streak aided by the practice of holding so-called pro forma sessions every three days throughout every adjournment. Those sessions – which consist of nothing but gaveling in and out and where, by unanimous consent, no business is conducted – serve a single purpose: to deny the president of the United States the recess appointment power, which is a constitutionally authorized power to temporarily install nominees to executive and judicial posts, temporarily, without Senate advice and consent, during recesses.
President Bill Clinton used the recess appointment power 139 times, including 96 full-time positions. President George W. Bush used it 171 times, including 99 full-time positions. But recess appointments under Bush screeched to a halt in his final two years in office, after Democrats took control of the Senate and, for the first time, implemented pro forma sessions to avoid an official recess.
In Obama's first two years, with Democrats in control of Congress, recesses were back and he made 28 recess appointments, all to full-time positions, in his first two years. Then Republicans won the House of Representatives and withheld consent from the Senate to recess, forcing the pro forma sessions to come back. They continued through the last six years of Obama's presidency, though he attempted to disregard them and make recess appointments anyway in 2012, which were struck down unanimously by the Supreme Court in NLRB v. Noel Canning.
The pro forma gambit is legally valid, and therefore the president cannot make recess appointments unless the Congress decides to officially recess, which hadn't happened since 2010.
You might reasonably expect no president will ever get recess appointments again except when the same party controls the House, Senate, and president. But for the last...
By Jon Decker
Health and Human Services (HHS) Secretary Alex Azar recently unveiled a new proposal requiring that a drug's 'sticker price' be listed in television commercials. While promoting greater transparency in the prescription market is a noble goal, Secretary Azar's proposal unfortunately misses the mark on how to best disclose drug prices to consumers. Even more worrisome, Azar's proposal carries the risk of patients unnecessarily forgoing vital medications due to confusion resulting from his hasty rulemaking.
The 'sticker price' that Secretary Azar wants to force all drug manufacturers to display in advertisements is often not indicative of how much a medication actually costs. This is because the pharmaceutical industry is able to take advantage of rebates to lower the costs of medication, and consumers may be able to lower the price even further through discount programs and/or by using their health insurance policy.
Since the 'sticker price' is not reflective of what patients actually pay, why confuse consumers by showing them misleading price info? Doing so would be similar to watching a commercial for a $60,000 Ford, only to discover at the dealership that the car actually costs $30,000.
Now here is where the stakes get higher. Imagine if someone saw that ad for a $60,000 Ford and thought "it's way too expensive". Most likely, they would never go to the dealership to see what price they could get for the car in the first place. Applying this to drug costs, Secretary Azar's proposal could dissuade patients from asking about a certain type of medication because they believe the out-of-pocket costs will be too high. This could prevent patients from accessing medicine they need.
Consumers would appreciate greater transparency on the cost of medications; However, Secretary Azar's proposal would not provide the most accurate information for patients to make an informed decision. A better proposal would give patients the full context when disclosing the costs of a drug – including the potential for savings. If Secretary Azar follows this path instead, his plan will be just what the doctor ordered.