Wednesday, May 29, 2019

Price Control FTW!

You may have seen the news that the Centennial State has become the first in the union to impose price controls on insulin:

"The state is capping co-payments for diabetics with private insurance at $100 per month"

The Tiffany Network also says that the average diabetic currently spends upwards of $500 a  month on insulin (although they offer no insight as to how they arrived at this figure, other than it was reported to them by the Health Care Cost Institute). They also don't say how much the average diabetic actually pays for the med (this is an important, and generally unremarked upon, distinction).

[ed: the Institute itself is apparently funded by 4 major carriers. FWIW]

While one's first reaction is likely applause, it should actually give one pause. As a longtime correspondent in Colorado notes in email:

"Recently our governor in Colorado signed a bill restricting copays on insulin to $100 monthly. Comments about this universally demagogue President Trump, blaming high prices on him. And a tv reporter did a completely uncritical segment on it. I wrote to him and told him that price controls create shortages, etc. But this won't work the usual way, because it is with an insurance company, not a retailer. I told the reporter that the insurance company may just raise premiums for everyone to make up the difference. Or they could pull out of the Colorado market."

I would quibble only with the "may" raise premiums: count on it.

It's also worth remembering that, while Colorado may be the first state to cap co-pays on insulin, they're far from the first to dabble in rx cost controls. From almost 4 years ago:

"Drug companies are facing a new campaign to contain treatment costs, this time with proposed rules in Massachusetts that would include a first-in-the-nation cap on some prices."

[ed: Which bill, by the way, "failed to emerge from a legislative committee." C'est la vie] 

Our correspondent also ponders:

"Why did Governor Polis choose diabetes as his target to reduce to costs? There are plenty of other chronic diseases out there that have attached meds to manage the disease. So why do diabetics get a break, but others don't? Does he want to buy the votes of diabetics?

Perhaps insulin is just a trial balloon to see how this flies and then move on to all meds."

This is an excellent point.

And it gets even better (for certain values of "better"):

"Let's play a game. What would happen if he capped the co-pay on all meds? And what if that co-pay was $1.00? It is easy to see that this would be so expensive, insurance companies would have to make it up in premiums. When premiums go up, the governor will have to create a new program to help subsidize them. So then he gets to buy the votes of those he is subsidizing, while calling the insurance companies evil."
Pitch. Perfect.

I responded that this echoes the minimum wage "debate:" why $15 an hour? Why not $25? Or $50? Or $1,000? Each is equally defensible, no?

In any event, will be interesting to see how the co-pay cap works out in Colorado.
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