The Wall Street Journal - 30.07.2019

A16| Tuesday, July 30, 2019 THE WALL STREET JOURNAL.

A Public Option Is No Winner for Democrats

Tsung-Mei Cheng (“Stick to the

Public Option, Democrats,” op-ed,

July 15) seems to believe the exam-

ples of Medicaid, Medicare and the

VA health-care system can be used to

promote expanding government-man-

aged health insurance.

The state of Oregon compared the

indigent who had Medicaid with

those without any insurance. They

found knowing you have insurance

means you don’t worry about not

having insurance. But having Medic-

aid increased inappropriate ER use

(costs) and didn’t improve the man-

agement of the two chronic condi-

tions studied (hypertension and dia-

betes)—more cost with no benefit.

The VA waiting-list scandal alone

is reason enough to question govern-

ment-run health care.

Medicare is popular. I just enrolled

and found, after 50 years of payroll

deductions, Medicare health coverage

(plus supplemental insurance) is

about half of what I was paying when

buying insurance privately. However, I

hear Medicare may run out of funds,

and no one knows what happens then.

In all three programs, many physi-

cians refuse to participate—and no

wonder. When I was in private prac-

tice the reimbursement from Medic-

aid was less than my billing and

other overhead costs. At least non-

profit hospitals get to save the

25%-33% others pay in taxes on the

income they get from treating Medic-

aid patients.

While some people call for govern-

ment-run health insurance, the exam-

ples used by Tsung-Mei Cheng

shouldn’t convince anyone.

MICHAELF.RAAB,M.D.

Sanibel, Fla.

While it’s true that most Ameri-

cans don’t want “a radical change

tearing up existing plans,” a public

option health-care system would ulti-

mately do just that, because it would

lead to a one-size-fits-all health-care

system that would cause patients to

pay more and wait longer for worse

care.

By design, a public option would

cause major disruptions to the mar-

ketplace where consumers currently

choose coverage that meets their

needs, driving up premiums for

Americans on private plans and forc-

ing more and more people into the

government system until it is the

only option that remains.

Research revealed that under one

such system U.S. hospitals would be

hit with $62 billion in cuts that

“would compound financial stresses

they are already facing, potentially

impacting access to care and provider

quality.” This diminished access to

quality care would come as hospitals

are forced to lay off health-care pro-

fessionals, scale back specialized care

programs or even close their doors.

Instead of promoting a risky gov-

ernment insurance system like a

“public option,” our leaders should

focus on constructive steps that build

on what is working in health care,

improve affordability and access and

fix what is broken today. Incidentally,

this is the approach favored by most

Americans, including most Democrats

and Democratic-leaning indepen-

dents.

LAURENCRAWFORDSHAVER

Executive Director

The Partnership for America’s

Health Care Future

Washington

LETTERS TO THE EDITOR

Letters intended for publication should

be addressed to: The Editor, 1211 Avenue

of the Americas, New York, NY 10036,

or emailed to [email protected]. Please

include your city and state. All letters

are subject to editing, and unpublished

letters can be neither acknowledged nor

returned.

“...alarge, regular with cream,

and please tell your chocolate

crullers to stop staring at me.”

THE WALL STREET JOURNAL

Smaller Money Managers Drowning in Rules

“Small Money Managers Lack

Backstop” (Banking & Finance, July

24) implies that increased regulatory

burdens will prevent outright thieves

from preying on investors. However,

the article is about criminals, not ac-

tual investment advisers. As an inde-

pendent investment adviser, I can tell

you there are mountains of regulation

and oversight already in place, but

these hurdles won’t stop the occa-

sional evildoer from taking advantage

of trusting people.

My firm is registered in Oregon,

and as such is now subject to the

state’s $1 million errors and omis-

sions insurance policy. This comes at

a significant cost, and an Oregon fi-

nancial regulator told me that the

policy was putting many small firms

out of business. More important, the

policy doesn’t cover the two cases of

outright theft described in the article.

Clearly, it isn’t the existing regula-

tions that failed the investors cited.

Rather than an ever-growing list of

rules that are hard to unpack and

take time away from actual investing,

the industry should focus on educat-

ing investors. The investors cited

would have been much safer putting

their money with an adviser at a Se-

curities Investor Protection Corpora-

tion-covered brokerage firm. These

custodians send statements directly

to clients, eliminating the chance for

a sly “adviser” to create false account

activity and holdings.

Further regulating small advisers,

who are already swamped by regula-

tory requirements, will serve only to

put more good people out of busi-

ness. Let’s instead explain to inves-

tors important things like custody of

funds, the fiduciary rule and suitabil-

ity. The best way to protect investors

is to teach them to be their own ad-

vocates.

SARACOOPER

Bend, Ore.

Pepper ...

And Salt

Dealing With the High Price of Some Insulin

Regarding William Galston’s “The

Drug-Price Problem Won’t Heal Itself”

(Politics & Ideas, July 24): I note that

he and other writers who lament the

cost of insulin seem not to know that

Eli Lilly makes three types of insulin,

which in most states you can buy

over-the-counter at Walmart for $

per 1,000-unit bottle. One hundred

syringes cost $12. I have serious dia-

betes mellitus and have managed it

with Lilly insulin for a decade for un-

der $100 a month. Tens of thousands

do likewise. Because it’s over-the-

counter, it frees diabetes sufferers

from the soft extortion of doctors

who force patients to appear for ex-

pensive, unneeded checkups to renew

prescriptions.

Yes, the expensive forms of insulin,

often delivered by pricey injector

pens, do work faster and maybe bet-

ter, but inexpensive insulin delivered

by old-fashioned syringes still does

the job. It has kept me alive, and I’m

grateful.

Recently I’ve begun the other,

rarely mentioned treatment for adult-

onset diabetes. I’ve lost 25 pounds

and eat only vegetables and proteins.

I use insulin just occasionally these

days, and have the lowest blood-

sugar levels I have ever recorded.

WESDENHAM

Jacksonville, Fla.

Although the price of insulin may

be high now, with only three major

firms making it, one can imagine gov-

ernment-dictated price controls, as

Mr. Galston suggests, would possibly

lead to shortages if one of those

three decided to leave the market for

greener pastures or to sell more

product overseas.

DAVIDPATTERSON

Fort Worth, Texas

Blame Obama, not Kerry,

For the Terrible Iran Deal

Regarding your editorial “Boris

Johnson’s Iran Test” (July 22): Your

discussion of the role of former Secre-

tary of State John Kerry for being

“outmaneuvered” by his Iranian coun-

terpart and the reference to ballistic

missiles in the July 2015 agreement

require elaboration.

Much as President George W. Bush

described himself as the “decider” on

the Iraq war, the decider on the Iran

deal was President Obama. Both he

and Mr. Kerry were Boston-trained

lawyers, not physicists, and should be

expected to know that the language of

Resolution 2231 that “called upon

[Iran] not to undertake any activity re-

lated to ballistic missiles designed to

be capable of delivering nuclear weap-

ons,” an integral part of the U.N. July

2015 deal, is legally unenforceable. But

three months after the deal, Samantha

Power, also a Boston lawyer, charged a

violation in the Security Council when

Tehran tested a qualified missile and

our U.S. ambassador had to be re-

minded that the existing agreement

didn’t state “prohibited” or “banned.”

BERTRANDHORWITZ

Asheville, N.C.

The Confusing Federal Reserve

L

ast December equity markets were tank-
ing, credit markets were seizing up, and
inflation expectations were falling. The
Federal Reserve nonetheless
raised interest rates and sig-
naled that the shrinkage of its
balance sheet was on “autopi-
lot.” Further market turmoil
soon caused the central bank-
ers to concede their error.
This week equities are at new highs, credit-
risk premiums are low, and inflation in the sec-
ond quarter showed signs of a modest come-
back. Yet Fed officials have signaled that this
week they will cut the fed funds rate by 25 basis
points or more.
If you’re confused by this inconsistent mone-
tary reasoning, join the club. The Fed seems to
be too. Two weeks ago, before the quiet period
for its pre-Open Market Committee (FOMC)
meeting this week, committee members were
a public cacophony of competing views and ra-
tionales. On the available evidence, the Fed is
making up policy on the fly.
The Fed’s latest justification for cutting
rates is prophylactic. “It’s better to take pre-
ventative measures than to wait for disaster to
unfold,” said John Williams, vice chair of the
FOMC, two weeks ago. “When you only have so
much stimulus at your disposal, it pays to act
quickly to lower rates at the first sign of eco-
nomic distress.”
We’re not sure how Mr. Williams defines
“distress” when the U.S. economy seems stron-
ger now than it did in the spring. The job mar-
ket has stayed strong and so has consumer
spending. The big weakness in second-quarter
GDP was business investment and slowing
growth abroad. But cutting U.S. interest rates
won’t help growth in France, and a major prob-
lem with investment is the uncertainty caused
by Donald Trump’s trade policy. Only Mr.
Trump can solve that.
A better argument related to the world econ-
omy is that the Fed can’t stand pat if other major
central banks are easing. The European Central
Bank last week signaled a likely resumption of
bond purchases in September, and the Fed won’t
want to get so far out of sync that it leads to a
sharp rise in the dollar. This is the case that Judy
Shelton, the likely nominee to be Fed governor,
has been making.
But this resumption of easing also carries

risks. In addition to a rate cut, the Fed is signal-

ing it will soon stop reducing the size of its bal-

ance sheet. If this means the Fed will reinvest

the proceeds of interest pay-

ments and principal as its

bond holdings mature, it effec-

tively means a resumption of

quantitative easing. A policy

intended as an emergency in

the 2008 panic will therefore

be revived when the economy is growing 2% and

the jobless rate is 3.7%.

So much for the Fed’s mantra about policy

“normalization.” The Fed will maintain a bal-

ance sheet of $3.8 trillion and will pay interest

on the reserves that banks park at the central

bank rather than deploy in the economy. This

keeps the Fed as a leading player in the mort-

gage and long-bond markets, which interferes

with market interest rates and can lead to dis-

tortions in the private allocation of capital and

risk-taking. That in turn reduces the economy’s

ability to grow long-term.

The alternative would be for the Fed to keep

reducing its balance sheet and reduce the pay-

ment on reserves while standing pat on the fed

funds rate. But that would give the Fed less sway

over economic decisions. Fed officials often

complain when politicians (especially Donald

Trump) try to influence their decisions, and we

sympathize. But the Fed has invited more politi-

cal attention with policies that expand its politi-

cal role in allocating capital.

The Fed also claims to be easing because it is

worried that inflation is below its target of 2%.

Yet only months ago it was saying that the de-

cline in inflation would be transitory. The GDP

price index rose at an annual rate of 2.4% in the

second quarter, so perhaps the Fed should wait

a month or two before declaring that the decline

in inflation will persist.

Chairman Jay Powell likes to say the Fed’s

decisions are “data dependent,” but to us it

looks more like the central bank is dependent

on no particular data at all. This contributes

to the suspicion in markets that the Fed is re-

ally trying to accommodate Mr. Trump’s public

demands for rate cuts.

We’d like to think that’s not true, and it’s

dangerous for the Fed’s credibility if it is. But

as long as the Fed bounces from tightening to

easing based on inconsistent logic, the suspi-

cion will persist.

The second-quarter

GDP report did not

make the case for easing.

Big Pharma vs. Big Pharma

P

fizer on Monday announced a deal to
combine its off-patent drugs with My-
lan, one of the world’s largest generic
manufacturers. This Big
Pharma cocktail could help
both manufacturers cope with
increased competition, but
maybe it should come with a
black box warning for inves-
tors: High risk of political in-
tervention.
The merger spins off Pfizer’s low-margin
business for drugs that have lost patent protec-
tion while providing Mylan with more scale and
cash flow to survive an onslaught of generic
competition. It will also let Pfizer focus on first-
in-class therapies. Last month the company
agreed to spend $11.4 billion to acquire Array
BioPharma, which is developing treatments
that target specific cancer-causing genetic al-
terations.
Pfizer is best known for its blockbusters Via-
gra and Lipitor, which was the top-selling drug
last decade and rang up $13 billion in annual
sales in 2006. But Lipitor sales have plummeted
to $2 billion since the statin lost patent protec-
tion in 2011. Viagra sales plunged 75% last year
after erectile-dysfunction generics from Teva
entered the U.S. market in December 2017.
Mylan on the other hand became politically
notorious in 2016 after raising the price of its
emergency anti-allergy injection EpiPen. But
it’s been struggling over the past few years as
the Food and Drug Administration has priori-
tized more generic approvals that have in-
creased competition.
Many manufacturers are also producing ge-

nerics of their own brand-name drugs. Pfizer

has launched its own Viagra generic, and Teva

last year introduced a generic EpiPen to com-

pete with Mylan’s generic

EpiPen.

More vigorous competition

has benefited consumers by

driving down generic and off-

patent drug prices. According

to the AARP Public Policy Insti-

tute, the average retail price for the 390 top-sell-

ing generic drugs plummeted 40% between 2015

and 2017. Thank you, Scott Gottlieb, the Trump

Administration’s first FDA Commissioner, who

made faster generic approvals a priority.

Generic manufacturers are struggling to

prosper in an inherently low-margin business.

Teva has laid off thousands of workers, and My-

lan sales fell 5% last year. Combining with

Pfizer’s off-patent drug business would provide

Mylan more volume to compensate for shrink-

ing margins while eliminating a direct competi-

tor in some drugs.

But political warning: The Trump Adminis-

tration and Democrats have proposed import-

ing price controls that would further crimp

margins. Some progressives such as Sen. Eliza-

beth Warren also want to let the government

manufacture generics, which would undercut

private business and retard generic develop-

ment especially in biosimilars.

Mylan shares rose 12.5% on Monday after the

deal was announced, so investors must be wa-

gering that the deal’s financial benefits out-

weigh the political risks. A healthier Mylan and

a more innovative, focused Pfizer could be a vic-

tory all around.

Pfizer’s deal with

Mylan may make both

more competitive.

Smearing Mitch McConnell

M

itch McConnell, the most phlegmatic
man in American politics, rarely gets
riled up. But on Monday the Senate
Majority Leader let it rip in de-
fense of his reputation, and
we’re glad he did.
Mr. McConnell was re-
sponding to a Democratic-me-
dia onslaught seeking to por-
tray the Kentucky defense
hawk as a toady for Russia. His offense is op-
posing some Democratic proposals to protect
the 2020 election from foreign meddling. In
particular he opposes attempts to nationalize
election rules and ballot procedures that have
been historically managed by the states. This
is his long-held position and makes sense since
a national system would be easier to hack than
the systems of 50 states.
But Mr. McConnell is running for re-election
next year, and the left needs a villain for the
failure of special counsel Robert Mueller to find
collusion between Russia and the 2016 Trump
presidential campaign. Enter #MoscowMitch,
the hashtag that appeared on Twitter and was
immediately picked up across the Democratic
media landscape.
“It started with the angry lies on MSNBC.

The host lied and said that I’ve dismissed Rus-

sia’s interference in our 2016 election as, quote,

a ‘hoax.’ Of course I’ve never said any such

thing,” Mr. McConnell said on

the Senate floor. “A few hours

later came the Washington

Post column. It was authored

by Dana Milbank, a pundit

who spent much of the Obama

Administration carrying water

for its failed foreign policies and excusing Presi-

dent Obama’s weakness on Russia.”

The column was headlined, “Mitch McCon-

nell is a Russian asset,” which the Senator

rightly called “a shameful smear.”

The truth is that Mr. McConnell has been far

tougher on Vladimir Putin than most Democrats

were across the Clinton, George W. Bush and

Obama Administrations. He pushed for tougher

sanctions on Russia than the Obama crowd

wanted and he supported the Magnitsky Act

that has allowed the U.S. to sanction Mr. Putin’s

cronies. He has also supported the bipartisan

Senate Intelligence Committee investigation

into Russian meddling in 2016.

Republicans can’t count on a media phalanx

to defend them from unfair attacks, so like Mr.

McConnell they have to do it themselves.

Democrats and

the media distort

his record on Russia.

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