| There was a time when
a man with ulcers would have to undergo surgery. Now he
can take Zantac for three or four months at a cost of $129
a month. A woman with osteoporosis can protect against broken
bones by taking Fosamax at $70 a month.
That may seem like a high price
to pay, but it beats the pain, lost work time and risk
to life and limb that drugs like these can help avoid.
Prescription drugs have succeeded in lengthening and improving
enormously the quality of life, thanks to modern technology
and the economic system in which that technology was incubated.
Yet, the fact that modern drugs
are by some measure “expensive” makes their
creators perfect political targets. Al Gore promises to
“stand up to the drug companies.” President
Clinton and Senator Ted Kennedy would impose what amounts
to price controls on prescription drugs provided under
Medicare.
The drug companies are investing
$26 billion a year in drug research because, so far, they
have escaped this fate. Do we really want to vest responsibility
for curing diabetes, AIDS and Alzheimer's disease with
the same government that gave us the Postal Service, the
IRS and the Big Dig?
State governments are becoming
more aggressive, too, in their efforts to push down prescription
drug prices. Massachusetts officials are formulating a
plan to negotiate drug prices on behalf of the uninsured
and of persons covered by state health or pharmacy programs.
There is talk of a New England consortium that would act
similarly on behalf of the entire region.
But are drug prices really so high?
Surely not by any accounting standard. Drug companies
invest $500 million and test as many as 10,000 new drugs
just to make one new life-saving drug available to consumers.
There would be no miracle drugs
if the drug companies couldn't charge prices high enough
to recover these costs. Price controls will dampen research
and development, limit choices and delay treatment, as
they do wherever they are imposed.
Proponents of price controls argue
that drug prices are much lower in Canada, Mexico and
other foreign countries. But no wonder. The United States
is, by far, the world leader in the development of new
drugs. Because foreign countries are willing to cede leadership
in this area to the United States, they have nothing to
lose by imposing price controls.
Foreign governments negotiate low
prices for their citizens much like price-control advocates
would do in this country. U.S. drug companies go along
with this practice as a way of covering some of their
fixed costs and out of consideration for foreign patients
who would otherwise have to go without. But the drug companies
cannot recoup their investments unless they have free
reign to set prices in the U.S. market. Mimic Canada and
any other country that struggles under the dead hand of
regulation and there will be precious few new miracle
drugs to regulate.
On average, prescription drug prices
are growing by less than 4% a year while expenditures
on prescription drugs are growing much faster, about 14%
a year. Rather than a sign of trouble, that's a sign of
progress, of the eagerness with which consumers
are willing, if necessary, to sacrifice a few hundred
dollars in order to avoid ulcer surgery or a broken hip.
If Congress or the states wanted
everyone to enjoy the same discounted drug prices that
are paid by patients in private insurance or managed care
programs, they could bring about that result by simply
giving the uninsured direct access to those programs.
For example, Congress could let seniors use Medicare funds
to enroll in competing plans that offer prescription drug
coverage, if that would improve the quality of care at
lower cost to taxpayers and patients.
Politicians who demonize the drug
companies in order to garner votes and to chip away at
the private health care system are playing with our lives.
If there is no one left to pay for expensive new miracle
drugs, there will be no such drugs to take. First on any
patients' bill of rights should be the right to buy prescription
drugs without the meddling of any would-be protectors
of our pocketbooks.
David G. Tuerck, PhD, is chairman
and professor of Economics at Suffolk University where
he also serves as Executive Director of the Beacon Hill
Institute for Public Policy Research.
Thi s article appeared
in the April 3, 2000 edition of the
Boston Globe.
Format revised
on 18 August, 2004
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