The November issue of Reason magazine included the article below by Katherine Mangu-Ward. I think it is an excellent example of how our government can screw things ups, no matter how good the intentions.
At the end of August, the U.S. Department of Agriculture bought 11 million pounds of cheese—that’s a cheese cube for every man, woman, and child in America—in order to bail out the nation’s feckless cheesemongers.
Secretary of Agriculture Tom Vilsack touted the aid package, worth $20 million, as a win-win: “This commodity purchase is part of a robust, comprehensive safety net that will help reduce a cheese surplus that is at a 30-year high while, at the same time, moving a high-protein food to the tables of those most in need.” (Most of the federal government’s new stockpile will go to food banks.)
This bailout of Big Cheese came on top of an $11.2 million infusion earlier in the month to dairy farmers enrolled in a 2014 federal financial aid scheme. The deal comes after months of lobbying by the National Farmers Union, the American Farm Bureau, and the National Milk Producers Federation, who were too antsy to wait for their next big cash cow to come ambling in with the farm bill.
The same week, Sen. Chuck Grassley (R–Iowa) wrote a letter to the pharmaceutical company Mylan, demanding an explanation for why EpiPens, the epinephrine auto-injectors that severely allergic people carry in case of an emergency, have quadrupled in price since 2007. Grassley cited constituents paying $500 to fill their prescriptions.
Hillary Clinton issued a statement about the price increases as well: “Since there is no apparent justification in this case, I am calling on Mylan to immediately reduce the price of EpiPens.” Donald Trump used the occasion to score points, tweeting out a story about hundreds of thousands of dollars in donations to the Clinton Foundation from the disgraced company. Sen. Amy Klobuchar (D–Minn.) echoed Clinton’s sentiment in a letter to the Federal Trade Commission: Lamenting that “antitrust laws do not prohibit price gouging,” she asked the regulatory body to look into whether Mylan has used “unreasonable restraints of trade” to keep prices high.
The summer’s cheese bailout and EpiPen price scandal are ideological Rorschach blots.Where one observer sees only the evils of the profit motive, another looks at the same fact pattern and sees the perils of an overweening regulatory state.
Vox sided solidly with the profit shamers, declaring: “We are the only developed nation that lets drugmakers set their own prices, maximizing profits the same way sellers of chairs, mugs, shoes, or any other manufactured goods would.” But pseudonymous blogger Scott Alexander of Slate Star Codex responded with a tidy reverse Voxsplanation: The cronyist Food and Drug Administration (FDA) and other government forces have squelched nearly every effort to compete with Mylan’s EpiPens, distorting the market beyond recognition via a process he chronicles in painful detail.
Mylan acquired the EpiPen from Merck in 2007, by which time the product was already 25 years old, which means the question of paying back research costs was moot. In 2009, Teva Pharmaceuticals tried to enter the market—and Mylan sued. Teva managed to get its product to the FDA anyway, only to be told that it had “certain major deficiencies,” unspecified. In 2010, Sandoz Inc. tried its luck and got bogged down in the courts, where the case still dwells. In 2011, the French drug company Sanofi made a bid to gain approval for a generic, which was delayed for years because the FDA didn’t like the proposed brand name. Which brings us to this year, when Adamis decided to sell plain old pre-filled epinephrine syringes directly to patients without the fancy injector. Cue an FDA recall, on the rather vague basis that insufficient study had been done on standard administration of a drug whose medical properties have been known since the turn of the last century.
And sometimes the tangled, dysfunctional relationship between big business and big government gets even more personal. The CEO of Mylan, Heather Bresch, is the daughter of U.S. Sen. Joe Manchin (D–W. Va.), which probably makes things awkward in the Senate cafeteria. But Manchin has joined his colleagues in saying that he is “concerned about the high prices of prescription drugs,” which probably makes things awkward at Thanksgiving. Then again, Mylan spends over a million dollars a year lobbying, which likely goes a long way toward smoothing things over.
In 2014 Congress passed the School Access to Emergency Epinephrine Act, which Grassley mentions in his letter. The law, he writes, “provides an incentive to states to boost the stockpile of epinephrine at schools.” It was co-sponsored by Klobuchar, the same senator who now wants to sic the antitrust dogs on Mylan. That law was a top lobbying priority for Mylan that year, along with new rules that reduced competition for generics.
Grassley also notes that the taxpayers are picking up the tab for kids who are getting EpiPens while on Medicaid or the state-level Children’s Health Insurance Program, and he adds that some 47 states require or encourage schools and other public institutions to stock EpiPens. In other words, Congress created a huge new class of price-insensitive EpiPen customers and now wonders why the price has gone up.
Meanwhile, the prescription laws still require you to get a special piece of paper from a doctor every single time you want to buy an EpiPen. If the doctor writes a brand name on that paper, it’s illegal for the pharmacist to give you a cheaper generic.
The story of the government cheese is just as convoluted. It’s easy to be lulled by Vilsack’s sell: Helping farmers and the hungry? Sounds great! But you know what else helps move a glut of cheese off the shelves and into the hands of poor people, without requiring taxpayer dollars? Lowering the price.
That’s something the industry isn’t willing to do, and—given all the pricing rules and production quotas that have been distorting dairy markets since the 1930s—mostly can’t do. With Americans eating a record 34 pounds of cheese a year, the problem isn’t an unexpected drop in demand.The problem is a failure to allow the laws of supply and demand to function at all.
Eleven million pounds of cheese may seem like small potatoes (to mix culinary metaphors), and it is in the larger scheme of federal spending and meddling. What’s another $20 million when the debt is already $20 trillion, after all? But our typically cheerful acceptance of central control of compressed curds and injectable epinephrine shows how widespread and insidious such conditions are in our lives.
What would real free market reforms look like, and how would they come about? In this issue, you’ll read what Libertarian Party nominees Gary Johnson and Bill Weld would do in the (very unlikely) event that they won the presidency and vice presidency (page 30). Reason TV’s Jim Epstein reports on the millennial libertarian activists in Brazil who brought down a corrupt populist president (page 50). And in Detroit, an American city where public services are essentially nonexistent, we detail how residents are building DIY alternatives (page 65).
In the meantime, there is no reason to think either the tale of the EpiPens or the saga of the cheese would play out any differently under President Trump or President Clinton. Taxpayer-funded sops to farmers are as bipartisan as it gets, and there is precisely zero chance that a president from either major party would discontinue the practice. Likewise, the iron grip of the FDA on the drug approval process—and the opportunities to purchase influence in that powerful bureaucracy—will not diminish one iota, regardless of which major-party candidate becomes America’s Big Cheese in January.
Craig Hill’s editorial explaining the importance of crop insurance to farmers made a lot of sense. (“This much is certain – For farmers, crop insurance is essential” 10/5/2016) Most business and individuals buy insurance to reduce risk, and, as Mr. Hill explained, farmers have plenty of risk. What he did not explain is why taxpayers need to subsidize about 60% of the premium. Contrary to his opinion, it definitely is a handout. Farmers, on average, have much more wealth than the average person. It doesn’t matter that much of the wealth is tied up in land values. Land can be sold for cash just like any other asset. Crop insurance is a good idea, it just should not be subsidized by taxpayers. In the next farm bill, a couple of years from now, we need to eliminate the taxpayer subsidy for crop insurance.
Link to Register article: http://www.desmoinesregister.com/story/opinion/columnists/iowa-view/2016/10/04/much-certain-farmers-crop-insurance-essential/91551614/
Our government, not free market capitalism, is to blame for this situation which has allowed Mylan Pharmaceutical company to jack-up prices for its EpiPen. The FDA is has created a huge delay in approving generic epipens. This has effectively given Mylan a monopoly. Established drug companies should have some type of fast-track authority to manufacture generic products without having to get advance approval from the FDA. Don’t blame private enterprise for problems created by government.
Many of us feel very dissatisfied about having to choose between the lesser f two evils for president. Many think that Hillary Clinton is dishonest and has been bought and paid for by large special interests, and many think that Trump is unqualified in international affairs and a braggart bully with no substance on the issues. We shouldn’t have to make the least bad choice.
Gary Johnson, former governor of New Mexico and the Libertarian Party candidate for President, is a good choice. Johnson is a down-to-earth, common sense person who believes in fiscal responsibility, social tolerance, strong defense international good will, and individual liberty. Socially, he has a live-and-let-live philosophy – you should be able to do pretty much whatever you want as long as you don’t initiate force or fraud against others, and don’t put others in danger. Fiscally, he believes the federal government should play a much smaller role in our lives. He does believe there is a proper role for government – to help protect our lives, our liberty, and our justly acquired property. He is against crony capitalism. He knows that a welfare state creates dependency. He believes that we should work together, cooperatively and voluntarily, to solve our common problems.
If you are polled about who you would support or vote for President, tell them that you are for Gary Johnson, the Libertarian candidate for president. At least that might get him into the national debates and give us a chance to learn about an alternative to the the lesser of two evils.
The Register has called for payday loans to be outlawed. (See link below.) Just know, that if payday loans are banned, people who have a need for short-term small loans will simply not be able to get one – from any legal source. Using the calculated annual rate of interest is somewhat misleading. If a person borrows $500 for two weeks and has to pay back $550, the annual rate of interest is $260%. If the maximum allowed annualized interest rate was 36%, then interest on a two week loan for $500 would be capped at $7. No legal lender will make a $500 loan for 2 weeks to only earn $7. The Register quoted Democratic Iowa Senator Joe Bolkcom as saying, “In Iowa, they would be better off getting a loan from a loan shark.” If Iowa bans payday loans, we may find out whether or not Senator Bolcom is correct.