News & Blogs

On Build Back Better and Gasoline: Why Price Controls Are Always A Bad Idea

Biden’s “Build Back Better” nonsense is getting a boost from an extremely powerful and well-funded lobbying force—the AARP—and it’s time for us to call them out on it.

The so-called “seniors advocacy organization” has been pushing hard for the passage of Biden’s massive, inflation-inducing spending bill. Why? Because the House version of the bill would have the federal government set the price of prescription drugs under the guise of “negotiation.” If the bill were enacted, manufacturers would face a 95 percent tax if they refuse to set their prices to the government’s arbitrary rate.

Imagine if the government tried to do the same with gasoline. It would set the price on what gas stations could charge per gallon, and if gas stations didn’t comply, the government would slap them with an additional 95 percent tax on the sale. This unreasonable penalty would all but force gas stations to charge whatever price the government decrees—or potentially close up shop or operate at a loss.

If there’s any doubt this is true, look no further than the gas shortages that followed Hurricane Sandy in 2012. Then-Governor Chris Christie passed an executive order that amounted to a de facto price control, and rather than lose money on each gallon sold, many gas stations stayed closed. As a result, affected Americans had to go without a gasoline—a product they desperately needed.

Prescription drugs would be no different. Pharmaceutical manufacturers spend impressive sums of money funding research and development of new medications. If the government controls the price set for a new drug, how would these manufacturers recoup their money spent on developing it?

The short answer: they wouldn’t. Instead, price-setting ultimately eliminates producers’ incentives to develop prescription medications altogether.

An analysis of an earlier version of the Democratic price control plan by University of Chicago researchers found that it would lead to between 167 and 324 fewer new drugs developed over the next two decades, with R&D spending plunging an estimated $1-2 trillion. There’s no way of knowing which diseases or ailments would go untreated because of the AARP-support price controls. It could be Alzheimer’s, cancer, or both. What we do know, however, is that American seniors—those who depend on prescription medicines the most—would face the brunt of the impact.

Price controls, or “negotiations” as the AARP and Biden administration would like for you to believe, are a step backward in terms of meaningful healthcare reform. The free market—not socialist schemes—creates new, more accessible drugs to treat illnesses.

Worse, what comes next if the federal government opens the door to price controls on prescription drugs? With inflation through the roof, what would stop the Biden administration—or future presidents—from trying to impose price controls on other goods, creating more shortages of food, fuel, or other necessities? With burgeoning inflation lifting the costs of everything, it would be easy for politicians basking in their “success” at setting drug prices to move on to broader price-controls in a 1970s redux.

Nancy Pelosi and her fellow Democrats passed Biden’s Build Back Better Act out of the House of Representatives. Now, the United States Senate is all that now stands in the way of future government price controls and the devastating consequences for seniors.