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Where Are The Handcuffs? (Drugs)

by Karl Denninger, Market Ticker:

One of Donald Trump’s few universally welcomed campaign promises was to do something about the prices of pharmaceutical drugs. Most Americans recognize that prices are too high, and are bothered by the rise of pharmaceutical price gouging…..

The key power is found in the “import relief” law — an important yet unused provision of the Medicare Modernization Act of 2003 that empowers the Food and Drug Administration to allow drug imports whenever they are deemed safe and capable of saving Americans money. The savings in the price-gouging cases would be significant. Daraprim, the antiparasitic drug whose price was raised by Mr. Shkreli to nearly $750 per pill, sells for a little more than $2 overseas. The cancer drug Cosmegen is priced at $1,400 or more per injection here, as opposed to about $20 to $30 overseas.

The remedy is simple: The government can create a means for pharmacies to get supplies from trusted nations overseas at much lower prices.

n other words Trump has the ability to administratively put a stop to the drug-price rape.

But let me point out that while this article is informative and points out a means by which Trump can irrespective of Congressional interference put a stop to the scam in one area of the medical system it ignores — intentionally — a much-larger and more-powerful hammer that every President has had available to them for the last 30 years and yet has refused to use.

The Executive has the power and duty to enforce the law. 15 USC Chapter 1, which is where The Sherman, Clayton and Robinson-Patman acts reside, is an extremely powerful body of law bearing on exactly the sort of conduct the entire medical system engages in daily.

Why is that body of law far more-powerful than any threat to legislate? Because those laws not only provide for ruinously-large fines they include prison time for the executives involved and since they already exist they cannot be blocked by Congressional inaction.

Fines are something that we know businesses simply incorporate into their cost of business and thus ignore. Witness Wells Fargo, which got caught breaking the law by adding on services that customers never ordered. That’s a serious violation of consumer protection statutes and yet nobody went to prison. In fact nobody was even indicted in that regard, but the company was fined. Did it matter? Not really. Sure, a few people lost their jobs including some executives but the fact of the matter is that measured objectively the company was unharmed and the people who were involved got away with what amounted to robbery by deception.

Why will this article go unanswered? It’s rather simple, really: If you simply enforce the law then you would cause health care spending to contract from it’s near-20% of GDP down to something approaching its historical average, which was 3%.

Let’s assume that we get 4%. That’s a 15%, roughly, contraction in GDP!

At the same time a whole lot of people who currently are employed but provide not one single minute of actual care to an actual person would either see their salaries drop precipitously or lose their job entirely. Here’s looking at you, medical coders, although certainly that’s not the beginning or end of it.

And what do we call that sort of economic contraction, even though it would be short-lived and soon reallocated into other areas of the economy?

A Depression.

I remind you the formal economic definition of “Depression” is a 10% decline in GDP from top to bottom. We would hit that metric in about an hour after the law began being enforced.

Read More @ Market-Ticker.org

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