What happens when governments employ price controls as part of a "central planning" economy pushed by socialists? In every place it has been tried, the results are consistent. Little gets produced except shortages and excuses.
For decades, the European Union has employed that model on medications. The EU leverages its single-payer healthcare systems, imposing price controls that have largely been subsidized by Americans, who pay much higher prices that subsidize the price-control discounts to the EU.
Donald Trump and his team imposed price controls of their own to combat this issue, and the Wall Street Journal reports on the results – shortages and excuses:
The Trump administration last year came up with a plan to combat high drug prices—making European governments pay more.
The result so far: still-high drug prices in the U.S. and fewer new drugs in Europe.
There has been a 27% drop in new drug releases across European countries over the last 17 months, compared with the same period before President Trump announced the plan, according to new data from market-research firm GlobalData. Meanwhile, drug approvals in Europe have held steady over that time period.
“You have companies saying, ‘Well maybe I won’t enter the market there because it’s just going to be used against me in the United States,’” said Ipsita Smolinski, director of health-policy research firm Capitol Street.
This isn't exactly a clean-hands policy on Trump's part. The administration used the clout of its own single-payer systems, Medicare and Medicaid, to force the pharma companies to accept this new system of price controls in the US. The agreement requires pharmas to use a price average from its EU customers as the cap on prices in the US markets within the CMS system, but also to those with private coverage or paying retail.
And this creates a yuuuuge problem for the pharmas, particularly on their newer offerings. Until now, they have priced their new drugs in the US to recoup their R&D costs before the 17-year patents run out and others can make generics. That has kept the wheels of innovation turning, but it has also built up a large amount of populist resentment in the US. The Left has promised price controls for two decades to deal with this issue, which would likely kill the innovation cycle altogether.
Trump's policy may also do that in the long run here in the US. First, though, it has already impacted access in the EU to new drugs made by pharmas that don't want to risk price caps in the US:
The program is still being rolled out and could eventually lead to lower drug prices. The costs of popular weight loss and infertility drugs have gone down in 2026 as part of the deals with the Trump administration.
Yet some companies have pulled their drugs from certain markets—or didn’t launch in the countries to begin with—so they didn’t have to lower how much they get paid in the U.S. ...
In February, Amgen withdrew a cholesterol-lowering drug from Denmark’s market because of fears that its Danish prices would translate to the U.S. Amgen didn’t respond to requests for comment.
Insmed Chief Executive William Lewis said last year that the company was delaying European launches of its chronic-lung-condition drug because of the U.S. policy. The drug, named Brinsupri, lists for $88,000 a year in the U.S.
The WSJ report notes that prices haven't fallen yet in the US, but the policy won't go into full effect until next year. Either prices will go down here, or the EU will lose access to a swath of patented medications within a short period of time. The ultimate effect would likely be shortages in both markets for newer medications and less investment in R&D as price caps in both markets erode any profit incentive for that level of risk-taking. It will, however, put the burden of risk incentives equally on the US and Europe for the first time in many years.
"Sauce for the goose" may be an effective and just short-term policy. The long-term policy should be to get governments out of healthcare monopolies and allow innovators in the field to operate in a healthy risk-reward environment. In the meantime, we can all learn a lesson about what socialized medicine and central planning of economies actually produce: shortages, excuses, and misery.
Editor's Note: The Democrat Party has been infected by socialism, and it's spreading FAST. Democrats are claiming there's nothing to worry about, but we know the truth.
Help us continue to shine a light on the socialist takeover by joining HotAir VIP. Use promo code FIGHT to get 60% off your VIP membership.
Join the Conversation
VIP members get the ability to comment on articles.