The Public Policy: Our Phoniest Drug War
Bandow, Doug
by Doug Bandow Our Phoniest Drug War The pharmaceutical "crisis" is a Washington invention. p residential election }.'ears are good for political consultants and bad for the rest of us, who...
...Complained another GOP congressional aide: "I guess the attitude now is let's punt till the next Congress...
...Washington, D.C...
...If the federal or state governments had tightly controlled prices, profits, and use of pharmaceuticals in the 198o's , numerous breakthrough drugs would never have been developed, limiting the treatment of everything from cancer to heart disease to AIDS...
...Far more uncomfortable are many Republicans...
...The GOP proposal "is not based on reality," complained one staffer...
...William Thomas (R-Calif...
...these is like trying to laugh when Dennis Miller is talking...
...On average it takes 20 months after FDA approval for a pharmaceutical to be added to the Medicaid formulary...
...is not, however, the place to start...
...But the FSS works because it remains limited...
...Congress is consumed by similar maneuvering for political advantage...
...Politicians have organized well-publicized bus trips to Canada to allow constituents to purchase pharmaceuticals at lower prices...
...Anyway, price controls would actually create a greater incentive to sell more of existing products and create fewer new ones...
...R ising pharmaceutical prices pose a problem, but one largely limited to the very small number of people who earn little but spend much...
...former increased, points out Laura Dummit of the General Accounting Office, are growth in pharmaceutical coverage by private insurance plans, the number of new drugs entering the market, and overall consumption...
...consumer would have paid 3 percent more in Canada, :7 percent more in Germany, 3 o percent less in France, 9 percent less in Italy, 8 percent less in Japan, 44 percent more in Switzerland, 9 percent more in Sweden, and 24 percent less in the UK...
...Many of them are not needy and more than twothirds of seniors have some coverage for prescription drugs...
...In 199o Congress set up the Federal Supply Schedule (FSS), which mandates a discount of at least 15 percent, up to the best price offered any private purchaser, for nonMedicare federal health care programs...
...The Democrats intend to rely upon pharmaceutical benefit management programs, which have not prevented sharp prescription drug price increases for HMOs...
...as one Republican staffer observed, "being Clinton-lite doesn't make it a better idea...
...Drug development is never likely to be cheap...
...The potential for disaster is clear...
...Another said: "Will it ever work in real life...
...The Democratic initiative would also encourage seniors to abandon private pharmaceutical coverage...
...Its dubious assumptions, he said, "were just fiat out wishful thinking...
...Despite recent reforms, a Competitive Enterprise Institute poll found that huge majorities of doctors (including 77 percent of oncologists) believed the agency was still too slow in approving new products, and that strong majorities believed Americans were dying as a result...
...So it is this year with pharmaceuticals...
...P E C T A T O R ' S J O U R N . ~ by Steve Chapman Songs for a Saturday College fight songs teach more than colleges do...
...4 percent, creating the perception of runaway prices-and corresponding political pressure for government action...
...There is little dissembling on the Democratic side, since irresponsible expansion of social programs is that party's constant goal...
...Concern about the nation's rising prescription drug bill has set off the usual flurry in the nation's capital...
...chairman of the House Ways and Means Subcommittee on Health, and Democratic Sen...
...Moreover, despite the highly publicized anomalies, controls save little money...
...In May, Maine passed complicated legislation to roll back drug prices...
...Conservative Republicans on Capitol Hilt readily admit that the competing legislation is shaped more by polls than facts: The GOP proposal "is damage control," admitted one top staffer...
...Finally, as the Institute for Policy Innovation points out, the federal government could help everyone by loosening FDA control of pharmaceutical development, thereby reducing costs...
...John Breaux of Louisiana led a majority of members of the Commission on Medicare Reform in proposing to allow beneficiaries to choose among competing plans...
...Alas, the GOP's stand-alone drug benefit risks "adverse selection...
...Drug makers would also become more hesitant to grant any discounts to any purchaser...
...Political pressure to act on drug prices largely emanates from the elderly, since Medicare generally does not cover pharmaceuticals...
...Said another: "You hope this bill stops you from getting killed politically...
...As costs rose, pressure for price and use controls would grow...
...But debate so far has focused on adding a drug benefit to Medicare...
...n fact, there's no crisis...
...And the federal government already regulates some drug prices...
...Congress should follow the injunction to first do no harm...
...Private Medigap coverage, too, could better meet this need if the federal government did not require policies to reimburse routine expenditures...
...Sentiments that would invite rolled eyes or derisive snorts elsewhere are given emphatic social approval...
...In fact, both Medicaid and Medicare were originally fee-for-service plans to which price controls were later added...
...only about four percent spend more than $2,000 a year...
...These proposals, complains Rep...
...The measure appears to be preeminently political: offer universal coverage, to hook all seniors on government assistance, with miserly benefits, low enough to keep initial budget estimates down but that could be easily expanded in the future...
...And as the American Legislative Exchange Council points out in a new study, more than zo states already have senior pharmaceutical assistance programs designed to help the indigent elderly...
...another would forbid any company from selling drugs for different prices anywhere in the world...
...As Bill McArthur, a physician with Canada's Fraser Institute, admits: "In effect, [Canada] must steal U.S...
...To the lips, to the eyes, to the girls who will love us some day...
...Similar problems afflict Veterans Administration patients...
...But if Washington responded by similarly confiscating the wealth of drug makers, companies would lose their primary incentive to make new products: Unless someone pays for the development of drugs, no one will develop them...
...Unfortunately, the tenor of the "debate" is reflected in the presidential campaign...
...they reflect sampling problems, fail to acconnt for the increased role of generics, and ignore falling prices for newer medicines and improved drug quality...
...Maybe this is because the?: have less time to read, listen to lachrymose country hal]ads, watch presidential debates, or read the NewYork Times...
...Economic prosperity, scientific discover}r and technological innovation have all combined in the form ofpharmaceuticals to offer new hope for the sick...
...expanding it to Medicare would increase firms' revenue loss, making them more reluctant to participate in FSS...
...Less than half of new drugs are made available to Medicaid recipients during the first four years...
...Mark Sanford, "represent a bidding war for votes...
...According to analysts William Orzechowski and Robert Walker, 7 ~ percent of the elderly spend less than $500 a year on pharmaceuticals...
...College fight songs fall into three basic categories: 1. prosaic exhortations to fight and win, 2. specimens of shameless bombast, and 3" compositions that might have 76 No v e m b e r ~ o o o - The American Spectator...
...One press secretary explained to me in detail how pleased his conservative boss was with the GOP proposal, sentiments those who have talked with other members of the congressman's staffknow to be false...
...Last year overall pharmaceutical spending increased by 17...
...A leading conservative congressman denounced "the plan as designed in Oz...
...pharmaceutical firms will spend about $z6...
...One conservative staffer acknowledges that "we should be pushing for Breaux-Thomas," since any s~and-alone plan would be a second-best solution...
...Which, of course, assumes a President Bush and GOP Congress...
...p residential election }.'ears are good for political consultants and bad for the rest of us, who bear the brunt of the usual policy "reforms" emanating from Washington, D.C...
...Vice President A1 Gore turned from attacking "Big Oil" to trashing drug makers...
...Most GOP staffers and legislators simply refuse to go on the record...
...The industry figures it costs on average more than a half billion dollars to produce each successful drug...
...Partisans of the University of South Dakota pledge, "Our sons and daughters ever will be loyal and true to thee, varsity, varsity, hail varsity USD...
...S Ports fans have lower rates of depression than other people, according to a stud?, done at the University of Kansas that was recently reported on the front page of the New York Times...
...Old-fashioned, inscrutable, and often laden with more corn than the Iowa state fair, the song has an importance that is hard to explain...
...Unfortunately, states are also beginning to play the price control game...
...But that increase is in total outlays, not average prices...
...In addition, unlike under normal health insurance policies, increased drug expenses could not be counterbalanced by reductions in other treatment costs...
...There's no question that prescription drags cost too much in this nation," claims Sen...
...The primary reasons the Douc BAYDOW is a senior fellow at the Cato Institute...
...As tempting as it might be for Congress to adopt a quick-fix measure, ill-considered action today would generate counterproductive consequences for Americans for years to come...
...Moreover, the congressional proposals have numerous holes...
...The biggest complaint about prescription drugs is their cost, even though Americans devote more money to alcohol and almost as much to tobacco...
...In the most detailed analysis available (using 1992 data), researchers Patricia Danzon and Jeong Kim report "that the average U.S...
...Much of the appeal is that it allows the public expression of simple and even excruciatingly hokey sentiments, at high volume, without fear of embarrassment...
...who use the most medications would be most likely to take the coverage...
...TD,ing to be morose while singing one of STEVE CHAPMAN iS a columnist for the Chicago Tribune...
...Critics complain that companies devote even more money to administration and marketing, but as a share of sales, drug makers put more into R&D than does the medical industry" generally, or companies that produce computer software, electronics, automobiles, or military hardware...
...Today thousands of people owe their lives to profit-making drug firms...
...Medicaid, which effectively imposes price controls through FSS, also uses formularies to regulate use...
...As a result, industry discounts to other buyers fell substantially: Legislators shifted rather than cut costs...
...Drug prices have increased less swiftly, and even those estimates are flawed...
...This is an irony-free zone...
...it also proposed, and then dropped, under legislative pressure, a plan to cut Medicare reimbursement for cancer drugs (a limited exception to the lack of any drug benefit...
...Unfortunately, though drugs generate enormous benefits, they do not come cheap...
...But, he proudly proclaimed, "I have taken on the pharmaceutical companies for nearly a quarter century now...
...Indeed, the Comptroller General has testified that price controls would be necessary to maintain the solvency of any drug benefit program...
...For instance, in 1998 drug makers gave away 2.8 million prescriptions worth an estimated $500 million...
...The industry, he claimed, is "gouging the consumer" and engaging in "corporate chutzpah...
...This toast is given at Maine: "To the Gods, to the Fates, to the rulers of men and their destinies...
...The administration has formally rejected such restrictions, but it has criticized the industry for high prices and threatened to push restrictions if its proposal is defeated...
...And 7 o percent of drugs sold are estimated to lose money...
...But that aas never going to happen this year...
...firms become their escape valve...
...Destroying the pharmaceutical industry would yield little financial relief for consumers or the government, but would deny everyone the medicines that have done so much to save and improve lives...
...They should receive aid...
...that is, those Today thousands of people owe their lives to profit-making drug firms...
...But unnecessarily strict regulation by the FDA makes it far more expensive...
...Then President Bush and a Republican Congress can deal with it...
...But where it works, nothing works better...
...The plan offers firstdollar coverage (no deductible), but with a total benefit cap provides no protection against truly catastrophic expenses...
...Providing Medicare vouchers to the elderly would allow them to select coverage that included a prescription benefit, while avoiding the problem of adverse selection...
...One congressional proposal would allow importation of U.S.-produced 74 No v e m b e r ~ o o o - The American Spectator drugs from other countries...
...Several other states are considering similar laws...
...The fight song is a peculiarly Nnerican organism, incapable of propagating except in its native soil-which is college campuses in general and football games in particular...
...Like all government health programs, a new drug benefit would inflate demand and thus spending...
...Nevertheless, pending legislation would mandate that drug makers extend to Medicare recipients the same discount provided to the federal government as part of the FSS...
...research and development to mainrain itself...
...Agency rules may as much as double the cost of new drug development...
...Jim Jeffords (R-Vermont...
...A related criticism is that drugs cost more in the U.S...
...For the same amount of money, existing policies could be reconfigured to provide the benefits The American Spectator " No v e ~ b e r 2 o o o 75 that Medicare recipients most need...
...The result is awful policy on both sides...
...Admittedly, standing for principle could prove politically costly...
...Companies generally winnow 5,ooo to lo,ooo potential substances down to just one marketable drug...
...Other governments can hold down prices only by wrecking their pharmaceutical markets...
...The administration (including candidate A1 Gore) and the GOP Congress (but not candidate George W. Bush) have offered plans with ten-year costs of $253 billion and $155 billion, respectively...
...But a thorough scientific investigation of the causes might also give some credit to one of the most powerful mood enhancers ever devised bv man: the college fight song, now playing at a stadium near you...
...However, prices overseas generally reflect the relative poverty of some states and the highly politicized nature of most foreign health care systems...
...The unusual blend of ancestor worship, free-flowing sentiment, and martial fervor found in college fight songs doesn't work just anpa,here...
...Traditional virtues may be out of fashion in many venues, but on an}' autumn Saturday you can find youngsters with body piercings and strangely colored hair celebrating lo p alty, teamwork, and reverence for those who have gone before, not to inention such quaint traits as "vim" and "steam...
...As for the elderly, Washington should cover pharmaceuticals as part of a broader overhaul of Medicare, a course advocated by George W. Bush...
...Indeed, some Republicans are scathing in private...
...than in other countries...
...Both measures would effectively subject American firms to price controls imposed by overseas governments...
...4 billion on research and development this year alone...
...But a GOP unwilling to fight for anything is unworthy of reelection...
Vol. 33 • November 2000 • No. 9
