Our ability to pay for prescription drugs is not unlimited!

I agree with John Stanford’s essay in the Wall Street Journal today that controlling drug prices would slow biomedical innovation and and research.  (WSJ 7/2/2020 – see link below.)  When you spend less money on anything you will get less of it.  But that’s okay.  Today, we get more drug research and innovation than we want to pay for.
Most drugs approved by the FDA are required by law to be covered and  paid for by Medicare and Medicaid regardless of price! Many are required by law to be covered and paid for by private insurance companies regardless of the price!  This is true even when the drug provides little or no improvement over other existing approved drugs!  Under such a situation we, of course, get maximum research and development.
If we did the same for space exploration, we would probably already have colonies on Mars.  If we did the same for climate change, we would probably already have that problem solved.  The point is that development of new prescription drugs is not our only priority, and our ability to pay is not unlimited.
We don’t have anything close to free market capitalism in the prescription drug market in the U.S.  Government is already very involved, mostly providing subsidies, protection from competition, and other benefits to drug manufacturers.  It is not unreasonable to set a drug price ceiling that is 20% higher than what is being paid by Australia, Canada, France, Germany and Japan.  We can always make special exceptions for something like a vaccine against the Covid-19 virus.
Link to John Stanford essay in WSJ:

https://www.wsj.com/articles/price-controls-would-throttle-biomedical-innovation-11593625880?mod=searchresults&page=1&pos=1

Patents should be more restricted, not liberalized.

I disagree with Paul Michel and Matthew Dowd, (Wall Street Journal, 1/24/2020, link below), that our patent laws do not give adequate and clear protection to inventions.  Conversely, we have become too liberal in both what is allowed to be patented and the length of time that patents are granted.

They urge the reversal by Congress of the Supreme Court of rulings that prohibit the granting of patents for “abstract ideas” and “natural phenomena”.  Abstract ideas, like mathematical formulas, computer code, or simple ideas drawn on paper, and natural phenomena, like the discovery of particular DNA or naturally occurring chemical compounds, should not be patentable.

Originally, U.S. patents had a maximum life of 14 years, then 17 years, and then 20 years.  Companies that earn billions of dollars in profits every year on their patents are very willing to spend many millions of dollars to lobby congress to extend their monopolies.  Who spends money lobbying to reduce the term of patents?  Shouldn’t the term of monopoly protection granted depend in part on how much it costs to meet government regulations related to the invention?  For example, prescription drugs may deserve a long patent term because of the cost to meet government regulations.  But there is no logical reason why all patents should be granted for the same length of time.  (Design patents are granted for shorter periods, but why should they be granted at all?)

The concept of “intellectual property” is man-made.  Since time immemorial, humans have copied one another.  For millennia legally protected private property was limited to physical property which could only be possessed by one person at a time.  Ideas can be possessed by many people at the same time without infringing on the physical property of others and without the use of force.  Monopolies, including the exclusive use of inventions, were originally granted by Kings to favored subjects through the use of force.  Our government protects patents through the use of force.  Contrary to the Founder’s intent, some patents appear to slow innovation rather than encourage it.  The case can be made that no patents should be granted.  In this case, Congress should expand patent protection.

Link to Wall Street Journal opinion:

https://www.wsj.com/articles/americas-innovators-need-clear-patent-laws-11579824646

Open letter to our federal legislators – please try to balance costs and benefits during this pandemic!

An open letter to our federal representatives  (I emailed this to my three federal representatives:
As you consider how much the federal government should spend in response to the current pandemic, please consider the following:
One trillion dollars equals about $3,000 per person for every man, woman, and child in the U.S., or about $12,000 per family of four!  Please be careful not to spend our tax money on anything that is not needed and not directly caused by the pandemic.  Specifically, there should be no money spent on the following:

  • Seniors and others on Medicare, disability, pensions, and other fixed incomes – they will continue to be paid.
  • People who have had no reported W-2 earnings during the past year – since they have been getting by on unearned income
  • People who have household earnings around or over $75,000 per year – they qualify for unemployment benefits.

Don’t give grants, but make low-interest rate loans available.  We can decide later whether or not to forgive any loans.  Don’t allow unrelated “riders” on any pandemic response bill.  For example, don’t’ forgive student loans, don’t add any permanent employer mandates such as child care, sick pay, paid family leave, etc.  Watch out for and deny other special-interest legislation trying to take advantage of this crisis.

Please try to balance costs versus benefits.  We have lived normally with the flu killing tens of thousands of U.S. citizens every year.  I am a senior – age 66 – and I don’t need any bailout.

Iowa needs to eliminate licensing laws and regulations that protect existing practitioners rather than their customers.

I agree with Valerie Stallbaumer in her letter to the editor in The Des Moines Register, (See link below), that the purpose of professional licensing requirements by government is to help protect the public from harm.   I disagree with her that it also is to guarantee quality. Safety issues are usually objective: we know pretty well what kind of things can hurt people.  Licensing should assure us that the licensed person knows and follows safe procedures.  But for many licensed professions, quality is subjective. If acupuncture is not effective for some people, what is the harm as long as they don’t get an infection?  The only reason I can think of why government would require a four-year program for acupuncturists is that acupuncturists and their schools lobbied for licensing to protect themselves against competition and to appear more professional.  Acupuncturists, physical therapists, tattoo artists, and ear piecers probably can learn proper safety procedures related to “needling” in just a few days.  We do need a complete review of licensing requirements and regulations in Iowa to eliminate those that prevent competition rather than protect people.

Price gouging can be a good thing.

Sometimes, price gouging can be a good thing.  If there is a sudden surge in demand for something, say face masks or hand sanitizer, is it better to keep prices low and encourage hoarding that can result in complete outages, or is it better to let prices go up as the market demand allows to discourage hoarding and encourage rapid increases in production?  Why would businesses pay for overtime, or expedited shipping, or other higher costs to quickly increase supplies if they are not allowed to increase prices?  There are certainly extreme situations where price gouging would be considered by most people to be immoral.  (For example, it would clearly be immoral to charge $1,000 for a glass of water to a person dying of thirst when you have plenty of it.)  But there are many other situations where allowing prices to go up significantly and quickly helps to make vital products available for important purposes to more people more quickly.  Private efforts to keep prices low and to prevent hoarding in an emergency are to be commended, but be careful before you call for laws or regulations to prevent price gouging.

No end to subsidies for favored industries?

The $1 per gallon tax credit for biodiesel producers just passed the U.S. House and appears likely to become law.  The credit, which expired at the end of 2017, will be extended retroactively 2 years and forward for 3 years through 2022.  This tax credit started in 2005.  How long must the welfare continue?  Biodiesel producers are no different than most other businesses and industries in that they become dependent on subsidies and lobby heavily to prevent the subsidy from ever ending.  We need to pass laws that phase out all forms of energy subsidies, as well as subsidies given to other favored industries.  We need free-market capitalism, not crony capitalism.

Link to related Register report:  https://www.desmoinesregister.com/story/news/2019/12/17/spending-bill-includes-long-sought-biodiesel-tax-credit-renewal/2677476001/

Don’t add long-term care coverage under Medicare

Contrary to the Register Editorial on 12/1/2019, we should not add long-term care as a new benefit under Medicare.  (See link below to The Register’s Editorial urging Medicare coverage of long-term care.)  If we want to solve problems using the force of government, we should do the minimum needed to solve the problem.  In this case, the problem is making sure that people receive medically necessary long-term care, not making sure that money is left to people’s heirs.
We currently have a pretty good situation: Many people voluntarily purchase private long-term care insurance.  Many others who could afford insurance choose to take a risk and not buy it.  Taxpayer-funded Medicaid covers the cost of long-term care for those who are unable to pay.  For those in the middle – not on Medicaid, but who would struggle to pay for private long-term care insurance – Medicaid already goes a long way to help them qualify for long-term care coverage.   For example, if one spouse of a married couple needs long-term care, the other spouse gets to keep a house and a car and some income, even though Medicaid pays for the long-term care of the first spouse.
The best long-term, sustainable solutions to our problems is to give voluntary, free choice to people and then expect them to be responsible for their decisions.  To the extent that we allow our government to force everyone into one-size-fits-all welfare programs, there will be ongoing, unsustainable frustrations, disagreements, and dependency problems.

Our federal legislators should oppose reauthorization of the Export-Import Bank

I urge our elected federal representatives to oppose the reauthorization of the Export-Import Bank.  (The Ex-Im Bank provides taxpayer guarantees to U.S. companies that export and sell products to international customers.  Authorization is set to expire on 9/30.)  This has been and continues to be a quintessential example of crony capitalism.  If a U.S. exporter has customers who find it difficult to find financing, the seller can always guarantee a loan and get a security position to get the asset back in a worst case.  If they still cannot get financing, the seller could provide direct financing.  In any case, our government should not guarantee such loan private companies.

I’m sure that small and large Iowa export companies are heavily lobbying for reauthorize the Bank.  I hope our representatives resist the pressure and vote against this bad policy where taxpayers are asked to take the risk and private companies reap the profits.

Time to start reducing use of government force in transportation fuels.

The forced use of biofuels, euphemistically called the Renewable Fuel standard (RFS), was established in 2005.  Then as now, the RFS requires refiners and importers of transportation fuels to add minimum amounts of ethanol or bio diesel to their fuel, or be subject to fines.  The requirement has grown from 4 billion gallons in 2006 to 15 billion gallons for traditional ethanol for 2019.  Existing legislation requires a completely unrealistic total of 36 billion gallons by 2022, including at least 16 billion gallons from cellulosic biofuels.
The current “rebellion” by Iowa biofuel leaders against the waivers of the FRS requirement that are being granted to small refiners is understandable.  (The waivers allow small refiners to be exempt from adding bio-fuels to their gasoline or diesel.)  All businesses that are dependent on government protection will fight back if they feel their favored status is being threatened.  Biofuels producers and their suppliers (corn farmers), will lobby hard and loud to stop any reduction of the RFS.
Will the subsidies and use of force ever end?  After 13 years of increasing subsidies, we now need to pass laws to start reducing, and over time end, the forced use of ethanol.

Need to wean energy producers off of government support.

There has been a recent outpouring of letters to the editor and paid advertising in The Des Moines Register thanking President Trump for the EPA’s decision to allow E15 (gasoline with 15% ethanol) to be used year round.  Many go on complain about the hardship waivers being granted to small refineries that exempt them from being forced to add ethanol to their gasoline under the Renewal Fuel Standard (RFS).  They say the exemptions are costing corn farmers and ethanol producers billions of dollars and are undermining growth of the ethanol industry.
Since 2006, the RFS has required petroleum refiniries to add more and more ethanol to gasoline.  (For 2019 the requirement is over 19 billion gallons.)  Investment in and growth of the ethanol industry (and related corn purchases) have been greatly dependent on this use of government force.  After 13 years, the industry has billions of dollars invested in over 200 production facilities, revenues of over $16 billion per year.  Any yet, not only can it not wean itself off of government assistance, it continues to press government for more and more support.
Public Choice Theory tells us what to expect when government and special interests create an artificial market using government force.   As investment and revenues reach billions of dollars, vested interests easily justify spending millions of dollars lobbying Congress to make sure the support continues.  At the same time, each taxpayer pays such a relatively small amount that it is very difficult to raise money to lobby in opposition to these government programs.
But we must do what we can, so now is the time to urge Presidential candidates as well as elected representatives to work toward ending government subsidies and special support for all forms of energy.