Dr. Gottlieb for FDA
Tuesday, March 14th, 2017This is a great story and Trump is to be commended in his selection to run the FDA. Scott Gottlieb is a fine physician who knows this area well and can sharply articulate efforts to alter the problems in this agency.
Scott Gottlieb, Trump pick for FDA, is on the side of the little guy
WASHINGTON EXAMINER
March 14,2017
President Trump’s pick for the Food and Drug Administration, Dr. Scott Gottlieb, is qualified and capable. He will do great work if confirmed, but his nomination provides a great opportunity to lay out a crucial lesson that regulation often serves to protect big business from competition, harming the consumer.
The Democrats’ attack on Gottlieb is easy to predict. Reporters have already provided the template. “He is seen as a strong supporter of [the pharmaceutical] industry and has championed deregulation,” NPR wrote in a story.
NPR also cited Gottlieb’s lucrative consulting for drug companies, and quoted a liberal critic saying, “He has spent most of his career dedicated to promoting the financial interests of the pharmaceutical industry, and the U.S. Senate must reject him.”
This is standard stuff from Democrats and Left-liberal media, of which NPR is a leading member. They always simplistically see arguments against regulation as helping corporate interests.
Gottlieb’s scholarly work, however, shows the truth is different. He is a scholar at the American Enterprise Institute — disclosure: so are Washington Examiner writers Michael Barone and Tim Carney — and has chronicled consolidation in the hospital and insurance industry, and argues that regulation has contributed to the trend. He’s also shown how regulations dampen competition in pharmaceutical industry.
Obamacare regulations, for instance, prevent new entrants into the health insurance markets, thus protecting incumbent insurers from competition, Gottlieb argues. He points out that the law regulations governing how much an insurer may spend on overhead and marketing penalize a new company for its start-up costs. “Spending on things like marketing a new plan to consumers, developing provider networks, and credentialing doctors” are effectively punished by these regulations because they don’t count as “medical” spending.
Further, “new carriers also have a hard time bearing the fixed costs of compliance.” Smarter and lighter regulation would allow more competition. Incumbent insurers might not like this, but customers would.
The same goes for hospitals. Obamacare “favor[s] the consolidation of previously independent doctors into salaried roles inside larger institutions,” Gottlieb wrote in 2014, “usually tied to a central hospital, in effect ending independent medical practices.”
Gottlieb argued against the hospitals’ dominance: “A true legislative alternative to Obamacare would support physician ownership of independent medical practices, and preserve local competition between doctors and choice for patients.”
Obamacare’s regulations and subsidies dampened such competition.
And drugmakers? The largest drug lobby, the Pharmaceutical Research and Manufacturers of America supported Obamacare, as did the American Hospital Association. So Gottlieb and the drug lobby are not of the same mind on major issues.
Second, Gottlieb’s proposed reforms of the drug industry generally aim at getting more competition, often in the form of generic drugs, to drive down prices and profit margins.
In August 2016, Gottlieb wrote in the Wall Street Journal that “a flurry of new regulations is raising production costs and reducing competition for branded drugs. The key to the generic-drug economic model is to keep entry prices low enough to attract multiple competitors.”
Gottlieb’s central goal in policy prescriptions has been more competition in a sector where it is scarce. A major barrier to entry and a major cause of consolidation has been regulation.
This is true not only in the health sector, of course. Banking has consolidated further under Dodd-Frank regulations. Major tax preparers such as H&R Block supported Obama-administration regulations on their industry in order to crowd out smaller practitioners. Mattel supported federal toy regulations and Philip Morris supported regulation of tobacco.
But no sector needs an injection of market competition as badly as healthcare does. Republicans would do well to remember that when fighting for market reform of healthcare, industry is not a reliable ally.
Gottlieb deserves rapid confirmation to head this crucial agency. We hope the Trump administration can learn from this that more regulation often means less competition, protecting the big guys instead of everyone else.