Michael Cannon (sensible libertarian, Cato Institute) has noted that Those Who Sell Out Will Eventually Be Punished. What he means is that once the pharmaceutical industry did the “deal with the devil” in 2003 for the creation of Medicare part D, it was only so long before real price controls will be instituted by the government. That’s because at some point the seat of power will be inhabited by those working on behalf of constituencies who dislike having their faces ripped off, as opposed to those looting the Federal treasury on behalf of the rippers-off of faces. Now that a mealy mouthed effort at negotiation has been passed by the new Democratic Congress—one that will be quickly vetoed anyway—the first signs of this “punishment” are coming.
Of course he could have said this about 1965. In fact many members of the AMA & AHA said just that at the time and bitterly opposed Medicare. Then they enjoyed 15 years of incredible rising incomes with no efforts to stop them before DRGs et al in the 1980s. And even then their incomes continued to rise for another 15 years, and haven’t rally stopped. So punishment can take a long, long time in coming.
And that is just the point. Who was the MMA passed in aid of? It was passed for the senior management at the companies it benefited—people like Hank McKinnell, Bill McGuire, Larry Glasscock. And what did they see after it was passed? Their stock prices rise when the program cut in for them (04 for United and the managed care cos, 05 for Pfizer and the pharmas) which of course sent the value of their retirement packages go through the roof ($200 mill for McKinnell, $1.6Bn sh for McGuire, I believe). That’s a pretty good market incentive if you ask me! I’m surprised Michael’s one of those Keynsians worried about the long run. After all none of the people “selling out” gave two hoots about it; they believe in the power of market forces.
Of course, there will be a long run, and Michael is kind of right. But it’s not those doing the selling out who will be punished. It’s the successors of McKinnell, McGuire et al who will have some cleaning up to do.