Allowing the Government to Compete in the Free Market

by Leigh Pomeroy

It's been two months since the November elections. The new Congress has been at work for almost two weeks, and after many long years has finally passed a bill authorizing the federal government to negotiate with drug companies on behalf of Medicare recipients. "Foul!" cry many Republicans. "It's anti-competitive! Socialist! Contrary to free market principles!"

"Now wait a minute," says the editorial board at the Mankato Free Press. Allowing the government to be a player in negotiating for better drug prices is expanding the free market, not shutting it down. In its Sunday editorial this week entitled "Medicate drug makers with markets," the paper writes:

U.S. drug companies have for too long been on a diet filled with government fat. Their appetite for government desserts has swelled their underbelly. It’s time to medicate these drug makers with the remedy of the free market.

The U.S. House of Representatives passed Friday a bill to allow the government to negotiate drug prices with drug companies, something that was prohibited under the new Medicare prescription drug law.

The vote was 255-170 with 24 Republicans voting with Democrats, none of whom voted against the bill. Minnesota Republicans Michele Bachmann and John Kline voted against the free market solution to a price-gouging problem. [Republican Jim Ramstad voted for it.]

Still, it’s refreshing to see Congress adopt an idea right out of a Business 101 textbook. If you buy in large volumes, you should be able to negotiate a lower price per unit with the seller. The seller sees this as a good deal too. They can make as much profit, if they sell more units, even if the profit margin per unit is somewhat lower.

This should be a "Well, duh!" moment for most free marketers. Even deposed 1st District congressman Gil Gutknecht, long an advocate for opening the domestic drug market to foreign competition, favored allowing the U.S. government to compete in this multi-billion dollar market. And why not? The governments of every other major industrialized country — countries that we compete with internationally — are major players in expanding access and limiting costs in health care.

In case opponents of allowing the U.S. government to negotiate for lower drug prices haven't been paying attention — and this includes Sen. Coleman as well as Reps. Kline and Bachmann — this country is rife with examples of government and private enterprise sharing the same markets. Most notable are public and private educational opportunities; public and private hospitals; the U.S. Postal Service and UPS, Fedex, DHL, et al.; and even public libraries, bookstores and video/DVD outlets.

For those who still wish to limit the government's involvement in markets, how about these examples?

• Imagine our air transport system without traffic control systems, the FAA and the CAB.
• Imagine all highways as privately owned toll roads.
• Imagine all city water and sewer systems being run as "for profit" corporations.
• Imagine electricity, natural gas and telephone utilities without government oversight.
• Imagine the military being run entirely by Halliburton and other companies of the same ilk.
  

The arguments against the government being a player in the drug market are specious. In fact, the government is already involved in two major ways: It oversees drug approvals and drug safety, and it grants patents (monopolies) for newly developed drugs.

Those who oppose the government negotiating on behalf of seniors and taxpayers base their arguments on very shaky grounds. The American people know it, and as their elected representatives every member of Congress should know it as well.