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May 23, 2023

Thanks, Joe: Biden's price cap on drugs is bringing shortages —medical expert

By Monica Showalter

The signature shortages of socialism have reared their ugly head again in a bad way in Joe Biden's America.

According to Dr. Scott Gottlieb, a former FDA commissioner and current Pfizer board member — a revolving-door swamp thing, sure, but indisputably a man who understands how the medical industry works — Joe Biden's Inflation Reduction Act is bringing new heights in medical drug shortages, particularly in the critical area of cancer chemotherapy treatments, where very expensive and hand-tailored drugs must be administered to patients on a strict schedule for treatment to be effective.

In an interview with Margaret Brennan on Face the Nation, Gottlieb laid out what was going on (emphasis added):

MARGARET BRENNAN: More than 130 medications are in shortage in the United States, including key cancer treatments according to the Food and Drug Administration.

Joining us now to discuss it is former FDA commissioner Dr. Scott Gottlieb, who's also a board member at Pfizer.

Doctor, it's good to have you back.

I wanted to have you explain this because the American Cancer Society warned this week, it's a serious and life-threatening issue for cancer patients. How bad is this shortage, and what's causing it?

DR. SCOTT GOTTLIEB (Former FDA Commissioner): Look, it's bad. This is a long-standing problem. There's about 300 drugs in shortage right now, active shortages, and so that's a high level. It's the highest it's been since 2014. But this has been a long-standing challenge. I dealt with it when I was at FDA going back to around 2003. That's how old this problem is.

And the issue is that this mostly affects sterile injectable drugs. That doesn't mean that small molecule pill-form drugs aren't in shortage, but the majority of these shortages are around the sterile, injectable drugs.

The reimbursement for these drugs under government programs has been driven down very low. Something above the marginal cost of manufacturing the drugs. And that's fine when it comes to a pill form drug where there's not a lot that can go wrong. But when it comes to an injectable drug, you need to leave a margin in so people can re-invest in manufacturing facilities, make sure they're high quality. They haven't done that and things go wrong and it results in shortages.

...and...

MARGARET BRENNAN: Well, the federal government is capping the cost of certain drugs because of high costs to consumers. Is that going to add to this issue?

SCOTT GOTTLIEB: Well, look, the features under the Inflation Reduction Act will exacerbate this problem because it will prevent these generic manufacturers from being able to take price increases. For example, if they enter a market for the first time or they spend a lot of money upgrading a facility to be complaint with state of the art regulations, they're not going to be able to take a price increase to recoup some of those costs. So it's going to come out of their own pocket.

Fifty percent of generic drugs right now, in a generic portfolio, lose money. So, a generic manufacturer loses money on half of their drugs that they market. That's not a sustainable business model.

I think the administration, under the IRA, should carve out these old, sterile, injectable drugs entirely. They didn't do that in the legislation. So it is going to exacerbate these problems.

So much for all the crowing from the Biden camp on how its "Inflation Reduction Act" of 2022 would cut prescription drug prices.  Remember this?

President Joe Biden signed the Inflation Reduction Act of 2022 on Aug. 16. This historic legislation will help millions of Medicare enrollees better afford their life-sustaining medications, and millions more Americans will be able to pay their Affordable Care Act premiums.

"This law finally delivers on a promise that was made for decades to the American people," allowing Medicare to negotiate prescription drug prices, said Biden, who was flanked by several senators and House members and an audience that included cabinet secretaries, staff and supporters in the State Dining Room at the White House. Because of this law, Biden said, "seniors are going to pay less for their prescription drugs" and "13 million people are going to continue to save an average of $800 a year on health insurance" because the law extends expanded subsidies on ACA policies.

With most lawmakers away from Washington, D.C. on an August recess, a celebratory signing ceremony has been scheduled for Sept. 6 at the White House.

The footnote that Biden left off is that the prices will be down, all right, if you can find them.

Lucky you.

The disgusting thing here is that this is basic economics.  Price controls create shortages.  It happens every time you try it.  I saw it up close in Venezuela in 2005, when the hugely popular Venezuelan Polar brewery pleaded with the Hugo Chávez socialist government to drop its price controls on agricultural ingredients used to make the company's products because the controls had made it utterly impossible for them secure the ingredients or sustain the business at all.  It was in a full-page newspaper ad that ran in El Universal.  The pleas, of course, went ignored, and today one cannot buy Polar products in Venezuela.

It happens every time because it's sure-as-the-sun-comes-up basic economics.

Here's what the Foundation for Economic Education has on its website:

The one consequence of price controls that is the most central and the most fundamental and important from the point of view of explaining all of the others is the fact that price controls cause shortages.

A shortage is an excess of the quantity of a good buyers are seeking to buy over the quantity sellers are willing and able to sell. In a shortage, there are people willing and able to pay the controlled price of a good, but they cannot obtain it. The good is simply not available to them. 

FEE notes that price controls typically come as a result of inflation as a "solution" from ignorant pols.  Even leftist economist Paul Krugman rejects them. 

FEE notes how bad it is:

Actually, this view of inflation is utterly naive. Rising prices are merely a leading symptom of inflation, not the phenomenon itself. Inflation can exist, and, indeed, accelerate, even though this particular symptom is prevented from appearing. Inflation itself is not rising prices, but an unduly large increase in the quantity of money, caused, almost invariably, by the government. In fact, a good definition of inflation would be, simply: an increase in the quantity of money caused by the government. 

The Hoover Institution's David R. Henderson outlines all the subtleties and nuances of this malign idea, with this passage explaining why the cancer drugs, as Gottlieb described, aren't there:

Another effect of price controls is to change the product. Imagine that you own an apartment complex on which the government imposes rent controls that force the rent below what you were planning to charge. For a given apartment, you now have more qualified tenants than you would have had with no rent control. So your incentive to maintain the property and to furnish amenities such as parking decreases. Further pushing you in that direction is the fact that you have less revenue to pay for maintenance and amenities. The product changes.

In "Price Controls," published in David R. Henderson, ed., The Concise Encyclopedia of Economics, Rutgers University economist Hugh Rockoff points out that because of US price controls during World War II, "fat was added to hamburger" and "candy bars were made smaller and of inferior ingredients."

With chemotherapy drugs, there's no room for variation, so the drugs simply don't get made. Or, we get problems like these, described in this Wall Street Journal editorial:

The Food and Drug Administration recently flagged problems at a major Indian plant and halted exports. Politicians criticize generic companies for shifting production to India and China to reduce costs, but the alternative for many would be to go out of business, as Illinois-based Akorn Pharmaceuticals did this winter.

Many U.S. and Canadian plants have also closed after quality-control problems, which is contributing to shortages for a bladder cancer treatment, chemotherapy drugs and albuterol, among others. Injectable generics are particularly complicated to make since they involve numerous production steps and ingredients.

All of this, because the companies making these critical medicines can't get paid to cover their costs.

That suggests a Canadianization, or U.K.-ization of the U.S. medical system, where patients die off waiting for treatment because of the shortages, the ugly creeping effect of socialization of medicine and the reason so many patients from those countries in the past have flown to the States for treatment, paying full fare.

It's sad stuff and reason alone for repealing Biden's garbage Inflation Reduction Act.  Price caps create shortages — every single time and Joe Biden remains willfully, culpably ignorant of this.  For those patients who depend on these drugs for life-or-death treatment, good luck.  Biden just cut off their access to life-saving medicine, and he's still crowing about it.

Image: Monica Showalter.

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