Biden's War on Profits

President Biden's programs and their fiscal ramifications

have inflationary tones; indeed, economists are saying that

inflation is currently making a comeback. 

But our president, in order to shore up support for his 

economic agenda, is looking for scapegoats for to palm

off the blame onto. He has found such a choice in the

pharmaceutical industry. Now, your faithful Peasant has

his own criticisms of that particular industry, but here I 

find Biden's accusations to be quite meritless. Claiming

that the pharma firms are "jacking up prices", he is 

castigating the very companies that have produced the 

vaccines and treatments (in record time yet!) that are

saving people the world over from the Coronovirus

pandemic. Making a pitch for his drug price controls,

he claims that we Americans "... pay the highest pre-

scription drug costs of any developed nation in the 

world." While he is right on this point, he must realize

that we also get access to more and better treatments 

sooner than in the other developed countries. And 

his fiscal initiatives will certainly have an adverse effect

on drug prices, among other goods and services. 

The profits that the pharma firms make make research 

and development into new treatments possible. In the 

meantime, drug prices have been declining thanks to

increased competition. Prescription drug prices have 

dropped 2.6% over 2020 while the consumer-price 

index increased 5.4%. Also keep in mind (a pity that

Biden doesn't) that Medicare already negotiates over 

prescription drug prices, which is why some consumers

aren't seeing the price cuts.

Private insurers that manage Medicare Part D plans demand

rebates from the pharma folks to place their medicines on 

formularies. Then the insurers use the rebates to reduce 

premiums for all beneficiaries. The result of all this:

drug makers raise their list prices, making some beneficiaries

with higher deductibles and coinsurance pay more out of

pocket for some drugs. 

However, a recent study by IQVIA discovered that net prices

after rebates for brand medicines declined 2.9% in 2020. 

Per capita-wise, real net spending on drugs in the U.S. 

increased by a mere 0.5% annually over the past decade 

even as higher-cost treatments have been approved.

President Biden wants to get rid of the profits that make 

possible the incentive to innovate. Large pharmaceutical 

firms invested $91 billion in new treatments in 2020.

The Coronovirus pandemic proved that the benefits in 

lives saved are a magnificent profit in another, more 

dear currency. Pity all this is lost on our president.

MEM