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Fri. October 23, 2020
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Money is of No Object: How the U.S Government Mishandles Price Gouging in Key Industries
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By Julien Kearns

The United States prides itself on its free market, laissez-faire economy; direct government intervention into the economy is minimal, and aside from large monopolies, businesses are allowed to do as they please. However, the government also acts as a consumer—they are so far removed from the average citizen that they fail to effectively address a problem that plagues everyone participating. This problem is price gouging, the increased price of a product or service (such as cancer treatments) to a level far greater than what is considered reasonable or what is required to produce the aforementioned product. The government deficit spends every year as they print money to account for the unreasonable prices of the defense industry and yet ignore lethal price gouging occurring in the pharmaceutical industry that affects everyday citizens. It would benefit both the United States and its citizens if the government treated price gouging in the pharmaceutical industry similarly to how it does with the defense industry, by increasing the budget for Medicaid and the Affordable Care Act to aid citizens dealing with overpriced prescription drugs.

Donald Trump’s proposed Fiscal Year 2021Budget requested $740.5 billion for national security and $705.4 billion for the Department of Defense (U.S Department of Defense 2020). Meanwhile, “the budget proposes $1 trillion in cuts to Medicaid and the ACA over ten years, with the cuts growing over time” (CBPP 2020). Growth in defense spending and cuts in Medicaid and the Affordable Care Act display the government’s tolerance for price gouging in both of these industries. In 2019, the Pentagon’s Inspector General found that defense contractor “TransDigm Group Inc. could be paid about 9,400% in excess profit for a half-inch metal pin. The Defense Logistics Agency could end up paying TransDigm $4,361 for the ‘drive pin’ in a July contract that should cost $46” (Bloomberg 2019). In 2011, the Project on Government Oversight (2011) reported on a leaked audit with an article titled “Boeing Overcharged [the] Army Up to 177,000 Percent on Helicopter Spare Parts.” The United States is no stranger to dealing with price gouging, and neither are its citizens.

There are other instances of price gouging in medical fields. For example, the cost of insulin and EPI pens, among other drugs, has been steadily increasing unreasonably over the past decade. “The list prices of common types of insulin have roughly tripled, even though they're the exact same products offered 10 years ago” (Business Insider 2019). Harvard Business Review (2016) reports on pharmaceutical industry horror stories, such as when “two Mayo Clinic researchers were awarded the Nobel Prize in medicine for discovering ACTH, the active ingredient in Acthar. Half a century later, a company that did not contribute to the medicine’s creation raised the price of a vial from $40 to $23,000” or when in “2015 Valeant acquired the heart drug Isuprel and promptly raised the price for a single vial from $440 to $2,700, citing a responsibility to shareholders to maximize profit.”.

Every year, funds in the government’s budget are ineffectively allocated and therefore harm American citizens. The Nation (2019) reports that the fiscal year 2021 budget request for national security would top the peak level reached during both the Korean and Vietnam Wars. It is naive to believe the United States is not engaged in a military operation as of 2020, but occupation efforts in the Middle East hardly warrant spending the equivalent to that of when we participated in armed conflict during the Cold War. The United States fights for control of oil in the Middle East while its citizens fight for affordable drugs to survive. According to the Washington Post (2019) Deficit spending during the Trump administration is increasing every year, hitting $984 billion in 2019. Money seems to be of no object to the United States government—and the wellbeing of its citizens seems to be irrelevant as well.

The United States needs to better allocate the federal budget to support those affected by price gouging in the pharmaceutical industry as opposed to standing idly by as its citizens are unable to access life saving medication. The defense industry serves as an example of how the United States seems to throw money at a situation to resolve it, yet only addresses those that fall directly into their own interests. The government would rather spend money on a half-inch metal pin that has become nearly 10,000% more expensive than for a struggling citizen’s insulin that’s become 300% more expensive. 

Julien Kearns is a high school senior in Washington, DC and is simultaneously attending George Washington University.

 

References:

Capaccio, A. (2019, May 14). Pentagon Contractor's 9,400% Profit on Half-Inch Pin Challenged. Retrieved from https://www.bloomberg.com/news/articles/2019-05-14/pentagon-contractor-s-9-400-profit-on-half-inch-pin-challenged

DOD Releases Fiscal Year 2021 Budget Proposal. (2020, February 10). Retrieved from https://www.defense.gov/Newsroom/Releases/Release/Article/2079489/dod-releases-fiscal-year-2021-budget-proposal/

Gillett, R. (2019, September 18). One chart reveals how the cost of insulin has skyrocketed in the US, even though nothing about it has changed. Retrieved from https://www.businessinsider.com/insulin-price-increased-last-decade-chart-2019-9

Hartung, W. D., & Smithberger, M. (2019, May 7). America's Defense Budget Is Bigger Than You Think. Retrieved from https://www.thenation.com/article/archive/tom-dispatch-america-defense-budget-bigger-than-you-think/

Heather Long, J. S. (2019, October 25). The U.S. deficit hit $984 billion in 2019, soaring during Trump era. Retrieved from https://www.washingtonpost.com/business/2019/10/25/us-deficit-hit-billion-marking-nearly-percent-increase-during-trump-era/

Schwellenbach, N. (2011, June 28). Leaked Audit: Boeing Overcharged Army Up to 177,000 Percent on Helicopter Spare Parts. Retrieved from https://www.pogo.org/investigation/2011/06/leaked-audit-boeing-overcharged-army-up-to-177000-percent-on-helicopter-spare-parts/

Smith, A. G. (2016, July 6). Price Gouging and the Dangerous New Breed of Pharma Companies. Retrieved from https://hbr.org/2016/07/price-gouging-and-the-dangerous-new-breed-of-pharma-companies

Van De Water, P. N. (2020, February 20). 2021 Trump Budget Would Increase Hardship and Inequality. Retrieved from https://www.cbpp.org/research/federal-budget/2021-trump-budget-would-increase-hardship-and-inequality

 

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