Comment: When government sets prices, innovation suffers

The IRA’s provision regarding Medicare’s drug prices will discourage the development of new medications.

By John M. Fluke Jr. / For The Herald

Among the adverse consequences of the mis-named Inflation Reduction Act is that Medicare will subject prescription drugs used by millions of older and disabled Americans to government price-setting, replacing the vastly more mutually beneficial negotiated price-setting mechanism.

In turn, this always degrades the pharmaceutical sector’s spending on drug discovery, development, Food and Drug Administration trials and, for the small fraction of drug candidates that actually secure FDA approval, deny people urgently needed critical cures and treatments.

As for most folks, my first two decades were dedicated to getting my education.

My next three decades started in new product design engineering, moving up through a variety of middle management roles to serving as CEO in high-tech manufacturing, where success always relies on technological innovation.

Much of my most recent three decades has been devoted to working with many biotech startups and watching the handful that actually succeeded in securing FDA approval provides me with a firsthand understanding of the critical role of innovative researchers who devote their lives to creating critical scientific advancements that benefits so many people; and, in the process, contributes to our nation’s economic vitality in general and in always finding pragmatic solutions to our citizens’ most pressing problems, from environmental challenges to public health emergencies and everything in between.

Our nation has succeeded not only because of individual liberty for all, but also because of our nation’s generally very carefully regulated free markets for goods, services and labor rewards innovators who lead sometimes monumentally complex initiatives to transform technological possibilities into practical cost-effective realities.

But when the “regulated” element becomes excessive, individual prosperity declines. When the regulated element becomes inadequate, nefarious players emerge; and consumers always suffer the adverse consequences.

Our nation currently is experiencing an episode of excessive regulation (along with excessive taxation) and, in particular, government price-setting is displacing the regulated free market approach that has always served the best interests of our country’s people. Allowing government to determine how much companies are allowed to charge for products or services has a very well-known — and consistently disastrous — track record.

Because Medicare is the largest health care payer in the country, it can negotiate very favorable pricing for everything the agency delivers to Medicare beneficiaries. This 900-pound gorilla can have its way with all of its suppliers; no government intervention is required! This regulated free market-perverting policy has drug makers generally reducing their aggregate research and development spending to develop new vaccines, diagnostics and therapeutics; just as Americans are finally free of our public-sector leadership’s dysfunctional covid-19 pandemic response that shut down the U.S. retail economy.

Among America’s greatest strengths is our ability to leverage our peoples’ diverse talents, vision, skills and creativity, which has enabled our free-market system to deliver a vast diversity of innovative solutions. Government price-setting, has always proven to not work in the past; and, once again, will deliver the same adverse consequences!

Please join me in requesting your elected congressional leaders terminate this current round of market-perverting government price-setting!

John M. Fluke Jr. joined Fluke Corp. in 1966 as an engineer, ultimately working his way up to chief executive officer in 1983 and then board chairman in 1984 following the death of his father. He also served as an independent director of PACCAR Inc from 1984 through 2015. He founded Fluke Capital Management, LP in 1978, serving as its chairman since then. He is an independent angel investor, assembling a portfolio of companies.

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