Jewish World Review August 1, 2002 / 23 Menachem-Av 5762

Thomas Sowell

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Bad medicine

http://www.NewsAndOpinion.com | The one monumental fact that is being ignored in all the political schemes to bring down the cost of pharmaceutical drugs is that it costs hundreds of millions of dollars to develop one successful new medicine.

No matter how cleverly the politicians try to shift those costs around, somebody has to end up paying those hundreds of millions of dollars, if you expect new pharmaceutical drugs to continue to be developed to cope with AIDS, Alzheimer's, cancer, and all the other maladies that afflict human beings.

Senator Hillary Clinton and other political demagogues make a lot of noise about how Canadians and others are paying much less than Americans pay for the same medicines that are produced in the United States. Apparently all we need to do is to get our prices down to the level of Canadian prices, whether by re-importing these drugs from Canada or by other means. But is that true?

What is really happening is that Americans are paying more of the high fixed costs of developing new medicines, which then allows others to pay the lower costs of producing these medicines. But if American prices also come down to the lower prices charged in other countries, then the high costs of developing new medicines will not be covered, and a slowdown in developing new medicines becomes virtually inevitable.

But, by that time, Senator Clinton will have been re-elected -- and that's all that matters, isn't it?

Those who are constantly pointing to the prices and the practices of other nations when it comes to pharmaceutical drugs ignore the fact that those other nations lag far behind the United States when it comes to creating new medicines. A majority of the most widely sold medicines in the world are American. The United States has more invested in pharmaceutical research than all of Europe put together.

The kinds of policies in other countries that we are being urged to follow has led to a decline in those countries' roles in creating new medicines. Germany, once a worldwide leader in pharmaceutical research, has fallen far behind the United States, and some leading German pharmaceutical firms are expanding their operations in the United States more so than in Germany.

Canada, Germany and other countries get the benefits of American research but contribute much less than the United States does to the creation of drugs. On the surface, these countries have a good deal, but in reality everyone is worse off, because the development of new medicines is slower than it would be if worldwide prices were high enough to cover research costs, rather than the much lower cost of manufacturing medicines that have already been developed in the United States.

You pay one way or you pay another. Paying in needless pain, debilitation and early death is one of the worst ways of paying.

As someone who knows what it is to be rushed to the nearest hospital emergency room by paramedics because I forgot to take my medication, I am grateful that today's clever political schemes for controlling the prices of pharmaceutical drugs did not exist in years past, when these medications were being developed. Otherwise, I might not be here.

The secret -- and the tragedy -- of welfare state politics, especially in an election year, is that you can always do some immediate good, right under your nose, at costs that are hidden, ignored or postponed. But those costs don't go away. They can grow even bigger in the dark.

Too many politicians see prices as just things to be manipulated, the way they manipulate words and emotions to get votes. But the underlying realities which prices convey are not going to go away just because the prices themselves are controlled.

Price controls in general have a centuries-long record of reducing the quantity and quality of whatever product or service has its price controlled. Price controls on food have produced hunger and even starvation in some countries. Rent control produces housing shortages in cities around the world. Medicine is not exempt from economics -- or from politics.

The political temptation with pharmaceutical drugs, as with other things, is to kill the goose that lays the golden eggs. But, in this case, that can also amount to killing sick people.

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JWR contributor Thomas Sowell, a fellow at the Hoover Institution, is author of several books, including his latest, The Einstein Syndrome: Bright Children Who Talk Late.

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© 2002, Creators Syndicate