Drug Prices
Standard but faltering Republican rhetoric on the drug issue is twofold: First, safety is compromised by using those nasty Canadian pharmacies; everybody knows millions of people die every year in Canada from taking bad drugs (right). Second, it's really about the research dollars; the rest of the world is mooching off of the US.
I heard an interview this morning on NPR with the Republican governor of Minnesota, Tim Pawlenty. His plan is a state-sponsored mail-order program that will import drugs from Canada. Citizens (I refuse to call them consumers) order their drugs from a web site maintained by the state, which selects the Canadian pharmacies that are eligible to participate. The state is then able to maintain a significant amount of control over the quality of the pipeline.
Much of the free-for-all that exists in the American drug distribution system simply does not exist in Canada. If you've been following the Washington Post article on the subject, you realize by now that the American drug system is full of tiny suppliers who keep medicines in the back of their Honda Civics, and sell them to whoever will ask. The "chain of custody" for medications is something that the pharmacy distribution system has been fighting for years. Why? They want to preserve their ability to get gray-market drugs, and enhance their bottom lines.
Tamoxifen is one of the most widely prescribe drugs for treating breast cancer. In Germany, in that country's national health care system, the drug costs around $60 US for a month's supply. In Canada, a month's supply costs about $50 US. Here in America, that exact same drug costs about $350 for a month's supply. How many thousands of women are dead because they could not get the medicine? A very large number. And as the number of uninsured increases, the number of deaths increases.
But why does this happen? How can the drug cost seven times as much here as it does elsewhere? The reason is that there is no global cost-benefit analysis within the American system.
If a drug, like Tamoxifen, is the best course of action for a given health situation, the doctor must prescribe it. The cost is simply not a part of the equation. If the doctor doesn't prescribe it, he/she will be sued. The insurance company must pay the bill; if they don't pay, there can be severe consequences. What we effectively do is prevent any form of cost-monitoring, in the system. The drug companies love this, and know this...and they know that they are able to raise their prices almost at will; insurance companies will be forced to pay, because doctors are forced to prescribe. Perhaps it is incorrect to say that doctors are forced to prescribe; they are prescribing what they believe to be the best available medication.
In Canada, Germany, and other National Health Care systems, the system works a little differently. In these systems there is global cost monitoring. What the system does, in effect, is examine the cost-benefit ratio of a medication like Tamoxifen. At $350 for a month's supply, there is a measurable benefit to the administration of the drug. The health care system is going to look at what else it could have done with that much money. If it can gain better care elsewhere (save more lives, increase quality of life) with the same money, that's what it's going to do. In effect, the health care system itself becomes the consumer, allocating scarce resources where it can find the most benefit.
The price of Tamoxifen in Canada is $50 because that is the benefit it provides to the health system. It is not about price controls; the Canadian health care system will not pay more than $50, because at that point, the money is better spent elsewhere. The German health care system has set this boundary at $60.
I submit that the American health care system needs this kind of global control; or, at least, it can become statistically aware of the efficacy of the drugs it uses, and construct an index of the cost-benefit of medications. The lack of caps on spiralling medical costs in the current American system is due to the lack of global cost-benefit analysis.
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Ross, that's an interesting
Ross, that's an interesting idea, but your post doesn't address the second (and to me far more meaty) part of the Republican rhetoric.
I am in favor of lowering drug prices in the USA. You are correct that the current scheme is massively weighted to the benefit of pharma companies and insurance agents.
But how do you address the issue of R&D funding? You say that this issue is nothing but "faltering rhetoric." But if it is even partly true that the US is footing the bill for drug development, if that money is cut off, development slows down. I haven't seen any evidence that this premise is false; how do we get over this hurdle?
For me, the ideal situation would be for drug prices to rise somewhat worldwide so that they may fall here. These are American pharma companies here, who are demanding they have it both ways: cheap prices abroad for volume sales, and high prices here for R&D. And now they want to make that law. But how to normalize this situation without a) making drugs costly everywhere b) putting pharma companies out of business or discouraging them from marketing say, AIDS and diabetes drugs worldwide, or c) stemming the new drug development process?
Your proposal for global cost monitoring is interesting, but I don't see how it addresses this concern. I agree that the US health care system is bery, bery kind to the drug companies to the disadvantage of patients. But given that this question is truly a global problem, with potentially disastrous effects, how do you square your proposal for drug price caps with the cost of R&D that the US is footing? I'm no Republican, and only a conservative north-by-northwest ,but I have so far considered this issue to be the one to take seriously. Where shall the money for research come from, if US prices fall and others do not rise?
Perhaps I've misunderstood this aspect of your proposal. Forgive me if I have, and feel free to issue a headsmack.
First, drug companies get the
First, drug companies get the standard "business expense" writeoff whenver they do R+D. There are usually huge additional tax writeoffs associated with R+D activities; certainly in Canada, where there is a kind of multiplier effect on the writeoff that you get when you do R+D. Then, they get to pick off the best of the medical research done by the public sector, world-wide, for free. They also get to enter into agreements with educational institutions, who often generate their IP with public money.
After all that, the drug companies are telling us that they don't get enough of a break. Unless we're ALSO willing to put up with ridiculous, relentless overcharging RELATIVE TO THE EFFICACY of a drug, we won't get any R+D? Hmm...doesn't seem right to me.
The point of the global (and I do not mean to use this word in the literal sense, but rather in the systemic sense) cost-benefit check is to focus research on those areas that benefit society as a whole, not on those that benefit the drug company.
Remember, under today's system the drug companies benefit massively by producing ridiculously expensive drugs that doctors are forced to use.
Contributing to the overall problem is the crazy cost of getting approval for a drug. I'd much rather see the costs of drug approval cut, than continue the profit-taking. We should provide some level of blanket immunity for drug companies from litigation, in exchange for a price-limiting, cost-benefit analysis like other countries have. The newly lowered R+D costs are easier to bear, and lower the barrier of entry to new companies in the space, which is where REAL competition and R+D will come from.
Ahhh... now THAT's an idea.
Ahhh... now THAT's an idea.
We Americans are in love with markets, yet we keep the barriers of entry very, very high in the pharmacology world owing to the high cost of approval. Right with you there.
Thank you for the clarifications; I have much to think about.