Americans had a golden opportunity to extend this practice to the new Medicare prescription-drug benefit. But the bill that passed forbids any haggling on price. As a result, a fabulously expensive entitlement will cost taxpayers tons more money than it had to.While I agree with Harrop in the acute example she has given, and I also think that Tauzin's actions do appear unseemly and Thompson's as disingenuous, I'm not sure how price controls negotiated for this specific program could translate into more "universal" drug price reductions, as Harrop seems to imply.
This shameful piece of legislation was the handiwork of Billy Tauzin, Republican of Louisiana. Tauzin is leaving Congress for a $2-million-a-year job heading the Pharmaceutical Research and Manufacturers of America, the drug-industry trade group. Given what Tauzin has done for drug makers, he would have been cheap at twice the price.
Tommy Thompson, meanwhile, is on his way out as secretary of health and human services. As a parting shot, Thompson said that the Medicare drug bill should have let the government negotiate prices on behalf of the beneficiaries. How nice of him to speak up, now that it no longer matters.
when the government gets involved in pharmaceutical pricing, consumers should expect disastrous consequences. Recent shortages in children's vaccines can be traced directly to the government's power, as sole purchaser, to dictate below-market prices. This "negative subsidy" has a chilling effect on manufacturers' incentive to produce and market vaccines, which explains why so few continue to make these vaccines. (Unfounded but attention-getting lawsuits against vaccine makers have similar effects.)According to a May 2001 Wired Magazine article, Dr. J. Leighton Read, former CEO and founder of Aviron and Edward Penhoet, (who was recently named as Vice-Chairman of California's Stem Cell Research Board by California Governor Arnold Schwarzenegger), agreed that
drug companies will be less willing to take the substantial risks involved in developing drugs for diseases such as AIDS that are rampant in the Third World, if they are eventually required to give their product away for free.Even though I applaud Read for his candor, I don't believe the general public will be amenable to this line of thought. Within the same article, Dr. Alan Garber, a professor of medicine and director of the Center for Health Policy at Stanford University, stated, "I think we have been too timid about looking at models other than controlled pricing." He believe that one possible solution "would be fixed prices for insurance companies to purchase an unlimited amount of drugs." Finally, while I previously linked to his piece, Robert Goldberg's observation bears repeating (in shortened form)
It costs about $500 million to bring a drug to market -- about the same amount it takes to build a power plant.
Read, who also founded Affymax, suggested that consumers rethink "anything assumed to be an entitlement."
"We need to feel some of the pain," he said.
there is only a limited amount of drugs that can be supplied at price-controlled levels worldwide. . . Europeans and Canadians are able to get quality drugs at lower prices only because Americans pay free-market prices that fuel research and development. . . the high level of pharmaceutical R&D ultimately depends on revenues: Cut drug-company revenues, and you necessarily cut R&D. . . applying relatively moderate price limits just to purchases under the new Medicare drug benefit . . . would reduce new drug investment by over $300 billion over the next two decades. This drop would consequently deprive many millions of ailing people of potential cures. . . Gvernment price controls are already shortchanging Europeans and Canadians. They have led to a decline in investment, with venture capitalists investing 15 times more in biotech companies in America than they do in the same number of European firms. Health systems and consumers must also spend more to treat chronic illness there because they don’t get new medicines as quickly or as widely as we do. German and British patients, for example, are less likely to receive new cancer drugs than Americans. . . If we import price-controlled drugs, we will import these shortage-created side effects too.If drug importation is only a stop--gap and price controls and greater government intervention haven't worked elsewhere, what will work in the United States?