Jewish World Review Nov. 15, 2004 / 2 Kislev 5765
Drs. Michael A. Glueck & Robert J. Cihak
What's the right price for pharmaceutical drugs?
In the heat of the recent presidential campaign, simmering health care
questions received a lot of media attention. Should Americans be allowed to
import cheaper drugs from foreign countries? Do we pay more than our share
of pharmaceutical costs?
Let's start with individual Americans importing drugs from foreign
Done. Although it's against rarely-enforced laws, American consumers already
purchase millions of dollars worth of drugs from other nations, especially
However, consumers are discovering that many drugs are cheaper in the U.S.
than they are in Canada - sometimes far cheaper.
In recent months, a task force led by the U.S. Surgeon General's office
found local drug stores such as Costco or Walgreen significantly less for
generic drugs than similar drugs cost in Canada.
"How so?" you may be wondering.
One factor is that some socialized countries, such as Canada, exercise more
control over the production and marketing of generic drugs than is the case
in the United States, increasing the cost of entry into the business
resulting in many fewer companies competing and significantly higher prices.
For buying prescription drugs under patent, these countries typically set up
a centralized system for the whole country, a monopsony. A government might
tell the drug company, "We'll pay you $XXX for this drug. If you don't like
that, we won't buy from you. And we won't protect your patent in our
country. In fact, we'll sponsor a company to make the drug right here."
Egypt gave this message to the Viagra patent holder.
In the short run, the cost of patented medications is often cheaper for
patients in the socialized country. In the long run, price controls
discourage innovation in the drug manufacturing industry, drive out
competition, decrease supply and increase total health costs. The money
costs can sometimes be kept down. But the health costs continue to add up,
resulting in suboptimal health.
In effect, this means Americans have a wider range of drugs available,
frequently at lower cost, than their counterparts in prosperous foreign
countries with controlled pricing. When unleashed, our huge consumer market
of individual shoppers drives prices lower than any government mandate
But who really cares about drug costs?
Not surprisingly, patients who don't pay for drugs usually don't even bother
to ask what they cost. For example, a friend recently had a heart attack.
While I was visiting him in the hospital, the attending nurse mentioned that
the small bottle of blood thinner in the IV cost over $1000. Nobody blinked.
Medicare covered it. If the patient and his family were paying, they might
well ask whether other medicines might do the job.
Likewise with physicians. When insurance is paying the bill, doctors have no
incentive to prescribe or even suggest lower cost alternatives. Even though
many common conditions, such as high blood pressure, can be treated
effectively with several different classes of drugs, including cheaper
generic drugs no longer under patent protection, some doctors blithely
prescribe the latest drugs on the market, regardless of cost.
So who, besides posturing politicians in the middle of a campaign, REALLY
cares about costs? The answer: nobody - unless the consumer is paying the
Drug, and health care costs in general, are rising more rapidly than would
otherwise be expected because patients - the recipients of the products -
aren't the purchasers. Managed care organizations, insurance companies and
Patients spending their own money with the advice of their doctor are often
motivated to find the most cost-effective way to manage their health and
medications. But not always. Many people buy elective services like
liposuction or eye surgery because they perceive value - and they're willing
to pay for it out of their own pockets.
Some individuals want more doctoring, others less. Similarly with
prescription drugs, lasagna, opera, rock concerts and just about everything
Although the federal Food and Drug Administration (FDA) unnecessarily delays
the introduction of many new drug products, Americans still have a wider
variety of drugs available to us than do those in many socialized countries.
Freedom from excessive regulation and controls, and allowing patients to
choose among competing private-sector health options, will serve our needs
the best in the long and short run.
The "right price" for any drug is the price the consumer is willing to pay,
taking into account the medical status of the patient, the risks involved in
different treatment options and the resources chosen to address the problem.
For the consumer, finding safe, affordable and effective drugs is the goal.
We'll achieve that goal best when patients are back in the driver's seat.
Editor's Note: Robert J. Cihak wrote this week's column
Michael Arnold Glueck, M.D., is a multiple award winning writer who comments
on medical-legal issues. Robert J. Cihak, M.D., is a Discovery Institute
Senior Fellow and a past president of the Association of American Physicians
and Surgeons. Both JWR contributors are Harvard trained diagnostic radiologists.
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