Tuesday, March 01, 2005, on the website of the Ludwig von Mises
President Bush's prescription drug benefit deserves
to be killed. Its estimated cost is now put at well over $700 billion for
the next ten years, nearly double the original estimate given by the
President when his program was enacted into law just fifteen months
Congressmen and Senators, who believe they were deceived into enacting it
by an artificially low estimate of its cost (just $400 billion), are now
busy seeking to contain its cost by, among other things, having the
Federal Government negotiate prescription drug prices with the drugs'
manufacturers. This is prohibited by the law in its present form, and the
President has threatened to veto this or any other substantive change in
actual doling out of the law's "benefits" isn't scheduled to begin until
January of 2006, there is still time to abort this highly destructive
program, which constitutes the largest increase in the welfare-state
functions of our government since the administration of Lyndon Johnson in
the 1960s, which was responsible for the creation of Medicare and
cost of the program is one major reason for aborting it. And this includes
the original estimate of $400 billion. The citizens of the United States
do not need any new and additional government program that piles
thousands of dollars of additional taxes on them.
The fact that
Congressmen and Senators are now demanding government "negotiation" of
prescription drug prices is another reason for aborting the program. Such
"negotiated" prices are price controls. They are prices imposed by the
government on sellers who have no choice but to accept them.
government is footing huge bills from a defined category of supplier,
price controls are virtually inevitable. The government is going to want
to limit its cost and so it will force down the prices it pays. That's
what happened to physicians and hospitals under the original Medicare
program and that's what must happen to the pharmaceutical industry. That
it is being considered so soon simply reflects the fact that the high cost
of the program has become apparent so soon.
As a minimum,
price controls will deprive the pharmaceutical industry of a substantial
part of the benefit of its patent protection. The premium profits afforded
by that protection are the target of any government "negotiation" of
protection on new drugs, and on new products and methods of production in
general, is not government interference but legal recognition of the
rights of intellectual creation. It enables the creators of new products
and methods of production to benefit from their creations, and so
encourages those creations. The premium profits of the pharmaceutical
industry on its successful new drugs offset its losses on its unsuccessful
efforts and provide the incentive and means for the industry's continued
development of new drugs. To the extent that it is deprived of those
profits, the effect will be fewer new drugs. Thus, there is good reason
for the law that enacted the prescription drug benefit prohibiting the
government's "negotiating" prices with the pharmaceutical manufacturers.
There is just no good reason for the existence of that law itself, in
part, as we have seen, precisely because it makes the absence of such
"negotiation" next to impossible.
The most fundamental and obvious
reason that the prescription drug benefit needs to be aborted is that if
there is ever to be any hope of reining in the size and intrusiveness of
government in the United States, an essential first step is to stop adding new government
programs. Just as the first injunction to a physician is “Do no harm,”
the first injunction to anyone who values economic freedom must be, “Do
not add new government programs.”
prescription drug benefit makes a mockery of all of President Bush's words
about liberty. An essential aspect of liberty is the freedom to dispose of
one's income and wealth as one wishes, not to have it seized by the
government against one's will. The prescription drug benefit must
substantially increase the size of such seizures.
prescription drug benefit makes an equal mockery of all of the President's
words about economy and fiscal responsibility in government. It is simply
ludicrous to add hundreds of billions to government spending and then be
at pains to scrimp and save on millions here and there, as he now appears
to be doing. Yes, he should be making the cuts he's now making, but first,
and more importantly, he should cancel the hundreds of billions he added
so soon before.
prescription drug benefit is a monster that should be killed before it is
As large as it is, it is may be exceeded by the cost of the President's
proposed reform of Social Security.
The same is true of copyright protection.
On the subject of the legitimacy of patents and copyrights, see Ayn Rand,
"Patents and Copyrights" in Capitalism: the Unknown Ideal (New
York: New American Library, 1965).