Semi-Daily Journal Archive

The Blogspot archive of the weblog of J. Bradford DeLong, Professor of Economics and Chair of the PEIS major at U.C. Berkeley, a Research Associate of the National Bureau of Economic Research, and former Deputy Assistant Secretary of the U.S. Treasury.

Friday, November 17, 2006

The Priority of Budget Balance...

Daniel Gross is puzzled:

Daniel Gross: November 12, 2006 - November 18, 2006 Archives: ALAN MURRAY ON DRUGS: In the Wall Street Journal today, Alan Murray writes a strange column. He acknowledges that the drug industry, abetted by Republicans in Congress, corruptly influenced the Medicare prescription drug bill in favor of Big Pharma.

The most conspicuous example of overreach was a line inserted in the Medicare Modernization Act of 2003 that prohibited the U.S. government from negotiating prices directly with drug companies. That prohibition was unnecessary; the law created a structure in which private insurers and health plans did the negotiating on the government's behalf.

But someone allied with the drug industry -- it's still a little unclear who -- insisted on making the implicit explicit, and in the process, created a campaign issue for Democrats.

But he doesn't think anything should be done about it.

As a result, the industry's big bet has now gone bad. Allowing the government to negotiate prices directly with drug companies has become Democratic dogma. And a few moderate Republicans are toeing the line as well.

That doesn't make it a good idea.

Truth is, drug companies can't really "negotiate" with the government, any more than a backwoods hiker can negotiate with a 900-pound grizzly bear.

With a market share of about 46%, the government would set drug prices, not negotiate them, and then establish "formularies" telling seniors which drugs they could use and which ones they couldn't. Would that make seniors feel better off? I doubt it.

For someone who frets a lot about the deficit, and about the need to cut entitlement benefits, this is a very strange argument indeed.


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