By Phil Kerpen
September 23, 2015 at 5:00 am ET
Health insurance premiums are rising because of Obamacare. And there is still one year left of the assorted reinsurance programs designed to mask premium increases, suggesting next year’s jumps will be even more eye-popping. That’s a political and logistical disaster for the Democrats who wrote the law and tied their political fortunes to its success. But rather than admit their law is too restrictive and come to the table to negotiate bipartisan reforms, Democrats and their insurance industry allies have decided on a cynical strategy: scapegoating drug companies.
A clearly orchestrated roll-out telegraphed how central this strategy will be to everything Democrats and the insurance industry do through the 2016 election. There are ballot measures being pursued in multiple key states by John Rother, a former AARP top lobbyist. A top administration official, Marilyn Tavenner, has moved to the health insurance industry’s lobbying group to pilot the coordinated campaign, while a top insurance industry executive, Andy Slavitt, has been nominated to replace her as the Obamacare boss at CMS. The liberal Kaiser Family Foundation has already released polling backing up the key themes. And Hillary Clinton has especially deep ties to the health insurance industry through a shared PR firm, the Dewey Square Group.
As Mrs. Clinton joined the health care fray, a coordinated media effort attacking drug companies materialized, led by both a news story bemoaning drug prices and an editorial calling for price controls in the New York Times among other liberal media outlets.
Mrs. Clinton promptly tweeted the conveniently timed Times article, adding: “Price gouging like this in the specialty drug market is outrageous. Tomorrow I’ll lay out a plan to take it on.” Of course, the plan is to call for price controls, while ignoring and downplaying the real Obamacare-created causes of rising insurance costs.
In short: the big health insurance companies have fully joined forces with the federal government, the Obama administration, and the Clinton campaign to protect their massive taxpayer-funded subsidies and the government mandate to purchase their unpopular products.
With costs rising, this alliance fully intends to scapegoat drug companies and expand the reach of government control through a massive political and media effort. Their goal is to avoid responsibility for Obamacare’s failures, score a presidential campaign victory, and keep the mandates and subsidies gravy train running.
As the Wall Street Journal observed last year: “The White House is thrilled that the industry has decided to misdirect the blame for rising health costs to the medicines that make up about nine cents of every U.S. health dollar, a share that is falling over time, rather than to ObamaCare.”
The damage done by applying price controls to prescription drugs will be catastrophic. Developing new life-saving treatments is astronomically expensive. The total cost of bringing a new drug to market is now $2.6 billion according to the Tufts Center for the Study of Drug Development, in large part due to regulatory compliance expenses. And for biotech drugs the costs can be even higher.
When innovators are on the cusp of major advances in cancer, diabetes, HIV/AIDS and hepatitis C cures, among others, regulations and government programs that arbitrarily limit the economic rewards for a major breakthrough will make it more difficult to raise capital, stunt innovation, and hurt patients who rely on new advances.
Proponents of genuine health care reform must take this challenge head on and defend the vital need to not only maintain but significantly improve incentives for developing new cures. Stronger international protections for intellectual property, a streamlined FDA approval process, and a commitment to stop any new domestic price control scheme, as well as efforts to fight to loosen foreign schemes so other countries pay a greater share of the cost of developing new drugs are just some of the solutions that must be pursued.
Unfortunately, the media is actively collaborating with the scapegoating scheme, designed by the insurance industry and its Democratic allies, which is already receiving favorable coverage.
Therefore, the eventual Republican presidential nominee needs to explain precisely how the corrupt alliance between the insurance industry and the Democrats works and why it so desperately wants to keep Obamacare with its mandate and subsidies. He or she must also make clear that the way to improve health care is not to spread the tentacles of government control even further through price controls but precisely the opposite, to open up what Dr. Robert Graboyes has called the frontier of creativity and innovation that will allow us to escape from a corrupt, politicized, bureaucratized health care system into a much better, healthier, happier future.
Phil Kerpen is president of American Commitment, a leading free market policy organization.