The INSULIN Act: Higher Insulin Prices and Less Innovation
In a new policy brief, senior policy analyst Drew Keyes reviewed the INSULIN Act, introduced by Senators Jeanne Shaheen and Susan Collins. According to Drew, the Act will cause considerable harm by reducing competition in the insulin market, raising insulin prices and health insurance premiums, increasing government spending, and erecting barriers to future innovation. The key takeaways of the INSULIN Act:
- It would increase net prices for insulin and raise Medicare and commercial premiums.
- It misdiagnoses the underlying problem and would hurt most diabetic patients and increase costs for many already facing high insulin prices.
- It would stymie innovation. With at least nine biosimilar insulins available or in the pipeline, imposing price controls would chill the environment for future innovation.
- It would burden the federal budget, increasing spending on Medicare and Medicaid.
Trouble with the emerging health care-only reconciliation package
Inflation is crushing American families, and Washington’s reckless spending is a primary contributor. However, drug price increases have been extremely low—a fact pointed out by the Wall Street Journal this week. Drug prices are up only 2.5% over the past year—way below general inflation of 9.1% and much lower than health insurance price growth, which is up 17.3% from last year.
The director of our Public Health and American Well-Being Initiative Dr. Joel Zinberg made the same point several days earlier in the New York Post. Joel evaluated the drug pricing proposals in the Senate’s draft reconciliation proposal and the troubling outcomes that they would cause. The central feature of the proposal would empower the federal bureaucracy to set pharmaceutical prices. Yet the pharmaceutical industry has been one of the better features of our health care system, delivering innovative, life-saving treatments that cost-effectively improve health. Drugs have been a stable, relatively small component of total health care spending. Actual drug prices after discounts and rebates, as opposed to list prices, have increased much less than general inflation and other health care spending. And as Joel’s analysis highlights, the price-setting proposal would have a harmful impact on patients:
[The price controls] will decrease the number of innovative, health-improving new drugs that ultimately become the low-priced generics most Americans use. Pharmaceutical companies won’t invest in research and development knowing that future profits will be limited by government bureaucrats.
University of Chicago economist Tomas Philipson estimated that the price controls in the Build Back Better bill would cause a 29% to 60% reduction in research and development, resulting in 167 to 342 fewer new drug approvals over the next 20 years. There is little reason to think this nearly identical Senate proposal will do much better.
Medicare drug-price controls were a bad idea in December and remain a bad idea today. If we want to preserve the innovative pharmaceutical industry that gave us COVID vaccines and therapeutics in record time, we should put a stake through the heart (head?) of this renascent drug-price control monster.
Senator Joe Manchin (D-WV) may be the 50th vote needed for reconciliation, and he has signaled that he will also support a two-year extension of expanded Obamacare subsidies. Such an expansion represents a significant increase in wasteful government spending with a huge benefit to health insurers that are already earning record profits. These subsidies go directly to health insurers, and most of the new spending will be on people who would already have coverage and provides much greater benefit to wealthier households. The subsidy expansion is also inflationary and will push up premiums and government spending. I’ve written several pieces on the problems with the expanded subsidies.
Openings at Paragon
Paragon continues to grow, and we need to hire additional members of our team to help fulfill our mission to improve U.S. health policy. Paragon is looking for talented, hardworking people dedicated to free-market principles and eager to make a difference. We are looking to hire a full-time health policy researcher as well as law fellows and interns. Please check out these listings on our Careers page and share the opportunities with anyone you think would be a good fit for Paragon.
On CSPAN
As Americans woke up the morning after Independence Day, I appeared on C-SPAN’s Washington Journal. I was on to discuss Paragon’s new report, “The HSA Option: Allowing Low-Income Americans to Use a Portion of Their ACA Subsidy as a Health Savings Account Contribution.” As always with C-SPAN, a variety of other subjects came up, including general problems with Obamacare, declining American life expectancy, health care price transparency, and how consumers need more control over their health care finances and decisions.
The next few weeks promise to be busy, particularly with the reconciliation bill and potentially the INSULIN Act on Congress’s agenda. Paragon will continue to provide the analyses needed.
All the best,
Brian Blase
President
Paragon Health Institute
