Government kills #2

New category – “Government kills”.

Children’s Hospitals Lose Some Drug Discounts

In an unintended consequence of the new health care law, drug companies have begun notifying children’s hospitals around the country that they no longer qualify for large discounts on drugs used to treat rare medical conditions.

As a result, prices are going up for these specialized “orphan drugs,” some of which are also used to treat more common conditions.

Once again, we must ALWAYS remember Bastiat’s broken window.

Joshua D. Greenberg, vice president of Children’s Hospital Boston, said that loss of the discounts “jeopardizes our ability to care for some of the sickest children with the most complex health care needs.”

Government kills.  Now, this might not be the “best” example, as in reality, these were distorted market prices to begin with.  Why?

Over the last 18 years, Congress has required drug manufacturers to provide discounts to a variety of health care providers, including community health centers, AIDS clinics and hospitals that care for large numbers of low-income people.

Several years ago, Congress broadened the program to include children’s hospitals. But this year Congress, in revising the drug discount program as part of the new health care law, blocked these hospitals from continuing to receive price cuts on orphan drugs intended for treatment of diseases affecting fewer than 200,000 people in the United States.

In other words, as I already detailed, pooling is theft.  In this case, the companies were forced (isn’t all government simply force?) to provide the drugs at a discount.  And, this “discount” was in fact paid for by higher prices on all other drugs and on other consumers.  The problem is that they didn’t know it was figured into the price.

In all fairness however, one might very well assume that if, IF, drug consumers were asked to pick up some of the tab so that needy children might have access to these drugs, most would have wholeheartedly agreed.  I certainly would have.  But, that is not coercion nor force.  We would in fact be knowingly paying for, and receiving satisfaction (utility) from, the purchase.

Christina M. Barnes, the pharmacy director at Galion Community Hospital in rural Galion, Ohio, said she was excited when her hospital qualified for the discount program earlier his year. But, she said, she was dismayed to learn that many drugs would be excluded.

“We were given an advantage with one hand, and it was taken away with the other hand,” Ms. Barnes said.

William A. Sarraille, a lawyer at Sidley Austin in Washington who represents drug makers, said, “The discounts are huge and can have a very significant, very negative impact on the ability of manufacturers to develop new, better products that meet patients’ needs.”

The Food and Drug Administration classifies more than 350 medicines as orphan drug products. Manufacturers said they could not recover the costs of developing such drugs if they were required to sell them at deeply discounted prices.

Sorry to burst Ms. Barnes’ bubble, but nothing was “taken away”.  What was actually taken away was other people’s property without their consent.  And the long term effect?  Fewer new drugs will make it to market.  Another broken window.

I loved how this administration was going to “bend the cost curve down”.  As if they had the magical powers to do any such thing.  Apparently they never bothered (well, I’m restating the obvious here!!) to heed Hayek’s wisdom.  They simply haven’t the knowledge to do so.  They will simply harm many and help none.

Policy driven economics simply breaks windows.  And to that we can now confidently add, kills.


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