I re-watched Office Space over the weekend and it reminded me of a few good life lessons. First, cubicle farms are awful. Second, office politics are awful, and even staplers can be considered political capital in that environment. Third, news that a boss doesn’t want discussed is usually delivered on Fridays.
The same statements hold in politics. Cubicle farms are still horrible. While it might not be staplers, many petty things are still coveted in politics. And, news that nobody wants publicized is delivered on Fridays.
President Barack Obama was pretty good at relying on Friday announcements. But President Trump recently won the award for burying a headline. On July 5, a Friday, the Friday after Independence Day, and one of his largest political shows to date, the president announced that he was going to produce an executive order to roll out a new form of price setting.
“We’re working on a favored nations clause, where we pay whatever the lowest nation’s price is.”
Trump’s idea is to peg drug prices to the same price that third-world countries pay. His plan is to peg prices to the same prices that socialist countries pay. His plan isn’t going to lower drug prices. At best, it is going to lead to fewer drugs being provided to other countries and at worst it is going to lead to drug shortages — fewer new drugs in the U.S.
It is a hard turn to go from talking about a cult comedy classic such as Office Space to people suffering. But announcing his plan on possibly the least newsworthy day of the year was a hard turn of never-before-seen proportions.
The evidence is pretty clear. Some countries do pay less than the U.S. for some drugs. But the data is also clear that they get access to the drugs later than we do in the U.S. Some countries don’t respect intellectual property, so the newest drugs aren’t developed in those countries, and again they get access to the drugs later than in the U.S. The delay isn’t just a day or two. New drugs might not arrive in these countries for years.
Maybe Trump agrees with Sen. Bernie Sanders and Rep. Alexandria Ocasio-Cortez that the government should fully control drug prices. Perhaps he doesn’t agree with them and is just willing to compromise his better judgment to fulfill a campaign promise. The reason behind the poor policy direction doesn’t matter because the result is the same. While it won’t happen overnight, we will start to look more like Venezuela. That is a bad policy direction.
The worst part is, there are plenty of good policy options.
Current federal policies encourage layer upon layer of middlemen in healthcare. Each of these layers costs more money, and some of them are getting away with up-charging piles of money. Insulin is one of the best examples, and therefore worst for patients. While the prices of insulin have been going through the roof, the net money that pharmaceuticals companies are making off insulin has remained fairly flat.
The answer is that the middlemen need to be removed from the system. The best way to do that is to find ways for patients to control more of their healthcare dollars. Like when people buy Snickers: The prices are about as low as they can go because the person eating the Snickers bears all of the cost. Same with package deliveries. We can ship something coast to coast for less than $10 because the companies have figured out how to streamline their process.
The best way to get the middlemen out of healthcare is to end the employer exemption. That isn’t politically possible, so the second-best option is to incentivize high-deductible plans that are paired with health savings accounts or other tax advantaged accounts. Give the patients a reason to shop. Give the patients a chance to ask questions. Make the patient the client instead of the insurance company. Let the free market work its magic.
In Office Space, they took a bat to the printer that was giving them trouble. It is a great scene, but in the real world breaking the printer with a baseball bat doesn’t do anything to help the situation. Taking a baseball bat to the drug market doesn’t do anything either. In both situations, figuring out what is wrong and attempting to fix that is the right solution.
An awful office printer might not be able to be fixed, but fixing the drug market, and therefore providing lower drug prices in a sustainable way, is attainable. If Trump focuses on real solutions instead of baseball bat-swinging antics, he could almost easily restore sanity to drug prices.
Charles Sauer (@CharlesSauer) is a contributor to the Washington Examiner’s Beltway Confidential blog. He is president of the Market Institute and previously worked on Capitol Hill, for a governor, and for an academic think tank.
