Beyond price controls: Ozempic for all who want it, and a strategic food reserve
Suppose that you wake up tomorrow and discover that a sadistic alien has turned you into an economist.
You are just getting over your shock at your new predicament (“How will I make friends? Will anyone ever trust me again? At least I’m not a lawyer.”) when Kamala Harris, responding to voter concerns about inflation, makes a vague statement in favor of government restrictions on the price of groceries. It just so happens that you have a regular gig writing columns for a national newspaper. You think that price controls are generally a bad idea, and the proposal made by Harris seems likely to be either ineffective or harmful. What should you say in your next newspaper column?
The case for constructive alternatives
Roughly speaking, as an economist with a newspaper column, you have three options for responding to bad proposals for price controls:
- Education: Teach people about the drawbacks of price controls
- Scare tactics: Claim that proposals for price controls signal the impending end of civilization
- Present a constructive alternative: Come up with an alternative proposal that is responsive to voter concerns about price increases but less harmful than price controls, or even beneficial
In response to Kamala Harris’ recent proposal to limit increases in the price of groceries, most economists resorted to education or scare tactics. (Of course, those who use scare tactics would claim that they are just trying to educate people about the true dangers of price controls.) I want to illustrate the third option above, presenting a constructive alternative. I will return to the first two options in a later post.
I understand the temptation to respond to every proposal for price controls by lecturing people about supply and demand. Price controls are often ineffective or harmful. Educating the public about economics is important, and even politicians may sometimes be seduced by the superficial logic of price controls.
But it is naïve to think that lectures about supply and demand will always be sufficient to win over voters. Price controls appeal to common sense. And Harris has an important election to win and a credibility problem on affordability issues due to the recent inflation.
The upshot is that it is worth asking if the Harris campaign can respond to voters’ understandable unhappiness with inflation without proposing some form of price controls.
My suggestion is to propose 1) making Ozempic available for all who want it, free or at a modest cost, and 2) establishing a strategic food reserve.
Ozempic for all who want it
The political case for making Ozempic (or a similar GLP-1 agonist) available for free or at a modest cost to people who want it is simple (I think the medical case is strong as well, but I won’t argue for that here):
- Many people want to lose weight.
- Losing weight through diet and exercise changes is very difficult.
- Ozempic is highly effective at helping most people to lose weight.
- In most cases, insurance does not cover Ozempic for weight loss.
There are probably several tens of millions of people who want to try Ozempic for weight loss but who cannot afford to pay the retail price, which is currently around $1,000 per month. It is difficult to think of another policy that could help so many people in such a tangible way.
Would making Ozempic (and similar drugs) more widely available be socially beneficial? In the short run the answer is probably “yes”, but the devil is in the details. If the government just mandated coverage for Ozempic without negotiating a price discount, the cost would be very high. But simply negotiating prices down may not lead to a great outcome. If the government lowers prices too far, it may discourage research on new drugs. In addition, the world supply of Ozempic will need to be greatly increased – we do not want to take Ozempic away from diabetics in other countries by offering to pay high prices. It might make sense to offer manufacturers some kind of advance purchase commitment and to share the costs of new facilities to encourage investment in new manufacturing capacity. In exchange the government could limit payments for additional doses to marginal cost plus a modest allowance for profit, while continuing to pay high prices for diabetes patients.
The point is that it should be possible to come up with a payment system that improves on the current situation. Right now, a highly beneficial drug is being withheld from patients to keep prices up, even though the cost of producing additional doses is quite low. And since developing better pricing schemes for drug development and production is important, this seems like a perfect opportunity to try a new approach.
Food reserve
My second suggestion is to propose a establishing a strategic food reserve. The idea here is to create a stockpile of nonperishable foodstuffs, so that the next time global food supplies are disrupted we can release supplies and moderate shortages and price spikes.
I am not sure if establishing a strategic food reserve is a good idea on the merits. But it’s probably a better idea on the merits than price controls on groceries, and it may be more useful politically.
There are no doubt many people who want politicians to pound the table and demand price controls. But it is not obvious that promising price controls is the best electoral strategy because (as we have seen) it will inevitably lead to widespread elite criticism.* A proposal to establish a food reserve would show that Harris is taking the issue seriously and thinking about constructive solutions. It would be popular in farm states. And because establishing a food reserve is hard to criticize using basic Econ 101 reasoning, many fewer commentators will be tempted to join a pile-on.
*It is possible that the elite criticism of grocery price controls actually helped Harris by publicizing her proposal. I doubt this, but if it is true then opponents of price controls have a reason to support a strategic food reserve rather than lecturing people about supply and demand.
Ozempic for all who want it
There’s a strong case to be made for this. Same for anti-hypertensives and statins.
All three of these meds are highly effective at prevention and essentially benign. Of course, it’s harder to make money from prevention than it is to make money from treatment.
The whole theory of HMOs was to incent prevention. As far as I can tell, that theory was falsified in practice. We need to stop thinking of hypertension, hypercholesterolemia and obesity as medical problems and start thinking of them as public health issues, like clean water and sanitary sewers.
I hope you are not suggesting that those medications be offered to the public without medical supervision. You need to know whether or not you are hypertensive or have excess cholesterol. Being overweight can be determined (more or less) by ordinary people, but is there self testing for cholesterol that would be sufficient to make a diagnosis? There are dozens of BP meters on the market, but only a handful that my health care provider will accept results from.
Screening for cholesterol and BP seems to be fairly standard for those who regularly see a doctor – even just once a year or so. Getting the general public to see their doctors more regularly should make sure their issues are addressed. Getting all of the general public to have a doctor is another issue. Screening the general public to find those who need medical care could be a public health initiative, but you still need to get them to doctors.
I would question your description of “essentially” benign. Relatively perhaps, for someone in good health. There are multiple classes of anti-hypertensives, and multiple drugs who have secondary anti-hypertensive effects. Not all of them have benign side effects. Not all of them will be effective on any given individual. In the last 40 years I have never been on less than 2 classes of anti-hypertensives, and usually 3. Finding the right combination of medication and dosage, and then modifying or changing it a few years down the line when something changes is not the job of public health.
@Jane,
“I hope you are not suggesting that those medications be offered to the public without medical supervision.”
Please point out where I said or implied any such thing. Take all the time you need.
As for essentially benign, please don’t assume that everything I post is about you. I’m referring to the general population of humans who take these drugs. If you acquaint yourself with the published literature, rather than depending on your personal experience, you’ll find evidence to support my comment.
Healthcare access is certainly important, but that isn’t the topic of my post.
I think that’s a half-step, two out of three: we need to stop eating the way we eat
Of course, we need to stop burning fossil fuels (now) too but ain’t gonna’ happen
It’s analogous. We’re just addicted to the crappy food we eat (I do not) as we are to oil, gas and plastic and the supply-chain infrastructure literally foundational to the economy
Providing free Ozempic. Letting the food companies off the hook and rewarding people for bad eating habits. Sounds like a plan!
@BillM,
Food companies don’t cause obesity. Food doesn’t cause obesity; My wife and I have eaten food our entire lives and we’ve never even been overweight, let alone obese. People with bad eating habits do cause obesity; for many or most, this is due to genetics and/or poverty. And obese people increase insurance rates for the rest of us. Ergo, “free” semaglutides will end up saving lots of money on treating the co-morbidities of obesity. Econ 101.
Food companies spend a lot of money on research to make their products more addictive.
One of my Chinese grad students told me when he first came to the US, he bought Oreos. When he bit in to one he spit it out because it was so much sweeter than the oreos he buys in China.
I don’t drink sugary drinks because I know how unhealthy they are. However, my tax dollars provide sugary drinks to obese people through the SNAP program. Now you would like me to pay for their Ozempic?
This is the state of healthcare in the US today. Treat the symptoms with pharmacuticals instead of getting to the root cuases of metabolic disease.
@Bill,
This isn’t about you. This is about public health and the healthcare burden of obesity.
I’m well aware that food companies, like car companies, firearms manufacturers, airlines and vaping companies, spend a lot of money on marketing. Marketing doesn’t cause obesity. Making poor eating choices does. I’d be happy to see a plan to incent better eating choices. Meanwhile, semaglutides, which get at a root cause of metabolic disease, appear to reverse and control obesity in a lot of people. They can save billions in downstream health costs in America, just as statins and anti-hypertensives have.
BillM
That metabolic disease could be the result of less income and in the end eating poor quality food. Raising the income of those who have trouble buying food with less sugar and sodium is a solution. It is unlikely going to happen as they are cheap Labor. Companies will wine about paying them more even if the direct labor is of little cost.
I knew someone would propose a national toilet paper reserve some day. I suppose some woman will propose a tampon reserve, and Fox News will make hay with that.