The Deadly Meddling of Government in Healthcare

Yet another example of how government skews and disrupts the natural order of free enterprise. The availability of life saving drugs is being disrupted by meddling politicians in Washington.

...The Federal Food and Drug Administration (FDA) has been stepping up its quality enforcement efforts — levying fines and forcing manufacturers to retool their facilities both here and abroad. Not only has this more rigorous regulatory oversight slowed down production, the FDA’s “zero tolerance” regime is forcing manufacturers to abide by rules that are rigid, inflexible and unforgiving. For example, a drug manufacturer must get approval for how much of a drug it plans to produce, as well as the timeframe. If a shortage develops (because, say, the FDA shuts down a competitor’s plant), a drug manufacturer cannot increase its output of that drug without another round of approvals. Nor can it alter its timetable production (producing a shortage drug earlier than planned) without FDA approval.

Even the Drug Enforcement Agency (DEA) has a role — because minute quantities of controlled substances are often used to make other drugs. This is the apparent reason for a nationwide shortage of ADHD drugs, for example, including thegeneric version of Ritalin. And like the FDA, DEA regulations are rigid and inflexible. For example, if a shortage develops and the manufacturers have reached their preauthorized production cap, a manufacturer cannot respond by increasing output without going back to the DEA for approval.

Price Controls. Also contributing to the problems of many facilities is a little known program that forces drug manufacturers to give discounts to certain end users. The federal 340B drug rebate program was created in 1992 to provide discounted drugs to hospitals and clinics that treat a high number of indigent patients, clinics treating patients on Medicaid, hospitals and clinics in the Public Health Service and certain Federally Qualified Health Centers (more listed here).Currently, the law requires drug companies to provide rebates of 23.1 percent for brand drugs; and 13 percent for generic drugs off of their average manufacturer’s price on qualifying outpatient drug use. States have the right to negotiate further discounts and actual rebates negotiated are typically much steeper than the federal requirement. (READ "Deadly Regulations" at Townhall).

Regulation Does Not Decrease Risk - It Decreases Our Freedom

The Objective Standard has an interesting interview with The Capitalist Pig founder Jonathan Hoenig regarding Hedge Funds. He says that Hedge Funds are similar to mutual funds except they are required to accept funds only from "accredited individuals" that is people who have a liquid net worth of at least 1 million dollars or who make more than $200,000 a year. Mutual funds are regulated - Hedge Funds are not but there have been calls in Washington to regulate them. Here is what Mr. Hoenig says about this.

Hedge-fund managers, like all investors, allocate wealth to create more wealth. They do so by analyzing markets and placing capital in accordance with their best judgment. In a word, they do it by “speculating”—an activity that could be seen as a bad thing only by those who regard thinking, planning, and judging as bad things. In the aggregate, successful hedge funds create massive amounts of wealth by investing intelligently. This benefits their investors and spurs the economy in general...

I have to laugh whenever I hear that hedge funds are these unregulated bandits, running rampant through the capital markets and wreaking havoc at every turn. While laughably false, however, this idea fuels conspiracy theorists who claim that a secret cabal of hedge-fund investors is behind the scenes pulling the markets’ strings. Oil going up? Must be the hedge funds cornering the market. Stocks going down? Must be the hedge funds selling short. They are scapegoats for every market malady.

The reality is that hedge funds are already heavily regulated. As I mentioned earlier, hedge funds are limited by the government to wealthy investors. And while mutual funds and brokers spend hundreds of millions of dollars a year on advertising, hedge funds aren’t allowed to promote or publicly solicit business in any fashion. You’ve never seen a billboard, TV spot, or magazine or direct mail advertisement for a hedge fund—because such promotions are illegal. Can you think of any other industry that is subject to such oppressive constraints?

Additional regulations and higher tax rates for hedge funds will only further violate the rights of managers and investors, by further restricting their ability to pursue rational, wealth-creating investment strategies, and by seizing more of their hard-earned profits. ..

In a free market, Madoff could never have gotten away with such massive fraud, because in a free market, people don’t rely on bureaucrats to do their thinking. They rely on themselves and on paid experts and on reputable ratings agencies—which, in a free market, would not be in bed with the government, as many of them are today, because a free market entails complete separation of economics and state.

Regulation doesn’t eliminate fraud; it only short-circuits the market’s ability to detect it. Just as Sarbanes-Oxley didn’t eliminate financial crime after Enron, the forthcoming reregulation of the financial markets will not thwart the Bernie Madoffs. It will only violate rights, raise costs, and curtail growth. (READ Here in TOS).