[Congressional Record (Bound Edition), Volume 149 (2003), Part 11]
[House]
[Pages 14250-14251]
[From the U.S. Government Publishing Office, www.gpo.gov]




                       PRICE CONTROLS NEVER WORK

  Mr. STEARNS. Mr. Speaker, as we return from recess to write and act 
on legislation for a Medicare prescription drug benefit, I am asking my 
colleagues and the American people to resist the temptation to succumb 
to price controls. This is perennial around here. A lot of folks 
believe that price ceilings for pharmaceuticals to be a feasible 
solution to the high costs that we experience with pharmaceuticals, but 
they never work.
  Against the advice of economic advisers, including Nobel Prize-
winning economist Milton Friedman, one President instituted a broad 
range of price controls in August of 1971; but many of the Members saw 
the PBS series ``Commanding Heights'' last year in which the author, 
Daniel Yergin, recalled ``the public was convinced that food prices 
were going up,'' so the President ``opted for wage and price controls. 
Voters liked the price controls, and the President was reelected in a 
landslide.'' Owing to that we can control prices but we cannot control 
the laws of supply and demand, the economy did not respond as the 
President hoped it would. Mr. Yergin said, ``Right away, the economy 
went out of whack; people couldn't cover their costs. Ranchers stopped 
sending their cattle to market. Farmers started drowning their 
chickens. Instead of controlling inflation, they were controlling 
shortages.''
  To those old enough to remember 1971, remember those price ceilings? 
Lines for gas were all over the place for our cars. Black markets were 
started. New work started for organized crime. Shortages on grocery 
shelves. And prices still continued to rise, while just as the public 
clamored about too expensive food, some begged for more price controls.
  Why do price controls not work? According to even a basic-level 
college text dealing with macroeconomics by

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Byrns and Stone, ``price ceilings keep monetary prices from rising but 
not average opportunity costs . . . there will be excess demand (or 
shortages). But price ceilings keep prices down, do not they? 
Unfortunately, the answer is NO!'' This is from a basic text in all of 
our college economic courses.
  The people who most value a good or service and are willing to pay an 
extra dollar in nonprice resources, such as waiting time, lobbying 
efforts, bribery, or black market premium, will do so. Have the Members 
noticed that more than a few Canadians who live under a price-
controlled health care system, if they need health care beyond their 
primary care, what do they do? They travel to the United States to get 
it because it is the best in the world. So the Members do not have to 
trust what I am saying today. Just read some of the basic text in our 
college economic courses.
  But why is it that a majority of pharmaceutical innovation occurs in 
the United States? Because the free market offers a reward to 
undertaking that risk. How many blockbuster drugs has Canada invented 
lately? The National Taxpayers Union warns lawmakers ``America is the 
world leader in the research and development that results in innovative 
lifesaving medications.'' For the United States to look to Canada for 
``drugs at an artificial price set by some other country would be, 
quite simply, a way to rob the pharmaceutical companies of revenue 
needed to refund research. It is certainly cheap to manufacture pills 
if someone else supplies the research and development funding. On 
average, it costs the pharmaceutical companies over $800 million and 
takes 12 years to bring a new drug to market. While countries like 
Canada may beckon to us with their centrally controlled drug prices, 
none of those types of countries can begin to approach the United 
States in the development of new, innovative drugs that can save 
millions of lives.''
  Citizens for a Sound Economy point out ``prescription drug prices 
differ between nations based on a variety of factors, including per 
capita income and type of health care system'' that is provided. 
Perhaps one of the reasons American seniors and disabled are looking at 
Canada's and Europe's ceiling-priced pharmaceuticals is because that is 
what they lack. We do not hear seniors asking for relief on the prices 
of outpatient visits or MRIs because they are not paying out of pocket 
themselves.
  One more unique viewpoint, that of interfering with Americans' right 
to vote with their dollars: Americans for Tax Reform ponders how the 
``impact of Canadian subsidies on the U.S. market will affect American 
taxpayers. Government subsidies of any kind interfere with market 
forces to drive competition and innovation. Foreign subsidies usurp 
taxpayers' ability to affect democratically the prices of necessary 
medicines.''
  The solution is not for Congress to manipulate prices, but to expand 
coverage to Medicare beneficiaries, to expand private sector health 
insurance coverage to the uninsured. Price controls never work.

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