The War On Drugmakers
April 13, 2004
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Posted by Aubrey Turner
I keep seeing this obnoxious commercial from AARP (I think). It starts out well enough with a recap of the tons of money we’ve wasted on the War On Drugs. But then it goes into their message about “affordable and safe” imports and working for “affordable” drugs in this country. They use war terms concerning getting prices down.
It gets me to yelling at the TV at that point, because if these people succeed in their socialist war on drug makers, they’ll be killing the goose that lays their golden pills. It costs a lot of money to bring a new drug to market these days, and America pays the bulk of these costs. If they succeed in getting the same kind of government fiat pricing that Canada has, the drug companies will never be able to recoup their costs, and no new drugs will be developed. It gets really frustrating that they can’t see something as simple as this.
What’s worse is that the drug companies are starting to have to spend money on public relations ads to fight back. That’s just one more cost that they’ll have to pass on to the rest of us.
Categories: Politics
There was a 60 Minutes story about four weeks ago on this. It was some of the most biased journalism I’ve seen lately. Not only was there NOBODY from the drug industry interviewed, they didn’t even bring in an economist to explain some basic concepts.
You’re right. The US subsidizes drug costs for Europe and Canada. If we had the same price controls as other nations, there’d be a greatly reduced incentive for investors to put money into drug companies developing new drugs. There’d be greatly reduced incentive for drug companies themselves to spend the hundreds of millions of dollars it costs to have drugs approved. A simple study of supply, demand, and the effects of price ceilings should reveal what could happen in the short run and the long run.
An unrealistic solution would be for Europe, Canada, and other countries to remove their own price control legislation, so that a global equilibrium price could emerge. This will never happen. A second unrealistic solution would be for the FDA to significantly relax the requirements for drug approval. Basically, make all that testing less scientifically rigorous, which could make new drugs less safe. This won’t happen because of the liability concerns of both the drug companies AND the FDA. Granting a level of immunity to drug companies, or requiring a signed waiver for prescriptions might be ways to deal with this. But an unintended consequence is that a patent would be worth a lot less, so you have the same type of problem we have now with Social Security—where do you start scaling it back so as not to kick the legs out from under the currently existing beneficiaries?
I suspect some of these folks feel like drug companies would survive and continue to thrive and research new drugs despite the price controls; or they really don’t care whether the companies survive and think life-saving/enhancing drugs ought to be cheap or free regardless of any annoying economic realities; or they’re misinformed about what it costs to bring a new drug to market; or they don’t understand what price ceilings everywhere else in the world do to prices here in the US.
Kevin,
A lot of people seem to think that government intervention is “free.” They don’t think through the consequences of their actions. In this case, if they get their way we can say goodbye to the American drug industry.
I like your first “unrealistic solution”, but you’re right that Europe and Canada will not be likely to give up their socialized medicine anytime soon (at least not before a catastrophic collapse). What’s worse is that drug companies have little recourse when dealing with these countries. Because their drugs are patented, the formula is known to anyone who wants to look it up. This means that even if they refused to do business with the socialized countries, those countries would just break the patent and make the drugs themselves.
A thought just occurred to me, though. I wonder if the drug companies could start making their formulas trade secrets instead of applying for patents. I suppose there would be problems dealing with the FDA, but there has to be some way to fix that. If they were to keep the formulas secret, then the socialists couldn’t just steal the formula and start making the drugs themselves. Of course, they might be able to reverse-engineer them, so maybe my idea isn’t workable after all.
I just find it frustrating that all these damn socialists are getting a free ride off of the American drug market.