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Wednesday, February 21, 2007
John Stossel :: Townhall.com Columnist
No Drug Price Controls
by John Stossel
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Will the Dems' health care Christmas Present to America be an improvement or detriment to our health care system?


The Democrats who now control Congress want to change President Bush's Medicare drug benefit to require government officials to negotiate drug prices with the pharmaceutical companies. Under the current program, competing insurance companies cut the deals and offer coverage to the retired and disabled.

Yet another lesson in the well-established principle: Government intervention begets more government intervention.

When Bush signed this program into law, it was the biggest expansion of the welfare state since Lyndon Johnson's Great Society. As with all "entitlement" programs, the costs will explode. Tax-financed health programs are always more expensive than promised.

Rep. John Dingell, D-Mich., defends the drug-negotiation proposal, saying, "It will deliver lower prices to seniors, lower prices at the pharmacy and savings for all taxpayers."

At first glance the idea makes sense. Instead of multiple companies competing to negotiate drug prices, have one big powerful entity do the negotiating. Wouldn't that lead to lower prices?

It might -- and that's part of the problem. We should be suspicious when someone promises benefits from a government monopoly. Government doesn't produce things. It simply uses force to move things around. So why think that Medicare, hardly a paragon of efficiency, should be given the power to negotiate -- in reality, control -- prices?

Government's clout to negotiate lower drug prices supposedly comes from Medicare's 43 million beneficiaries. According to the theory, drug companies will have little choice but to submit to the government's demands because having their products excluded from the program would be self-destructive.

But there are problems with that theory. First, the government doesn't know what the "right" price is. In the real world, prices are set by supply and demand. Government is not part of the marketplace and would have no competitors. Its attitude would be "take it or leave it."

The story won't have a happy ending. A lot of money is needed to develop medicines. Getting a new drug through the FDA labyrinth to consumers takes $1 billion. Most drugs in the research pipeline never even get that far. It's a failure-intensive business. Continued...

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About The Author
John Stossel blogs at http://blogs.abcnews.com/johnstossel/ is an award-winning news correspondent and author of Myths, Lies, and Downright Stupidity: Get Out the Shovel--Why Everything You Know is Wrong.
 
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drug intervention
The government should educate people on how to use drugs and use minimum daily dosages. There should be divided interventions and thus competition can control the prices.

Raj
http://www.drug-intervention.com/kansas-drug-intervention.h tml

John Stossel, Coolmoose and Pirate

Interesting and informed comments, all. And I apologize for the length of my comments here, but I believe them to be necessary.

I fought tooth and nail to keep the Medicare Modernization Act, with its Prescription Drug Plan, from becoming law.

My thinking was that there was no reasonable way to "lower" the prices of drugs when there are so many middlemen to consider. Not only must middlemen be considered, but simply try to imagine the increased numbers of insurance company employees, increased numbers of Medicare employees, increased space needed for these personnel, and increased numbers of computers, increased health care and prescription drug coverage for all these additional personnel. It boggles the mind to consider it. To believe this will help "lower" drug prices is madness.

Adding insult to injury, I have no idea of the current number of billions of dollars of taxpayer funds are provided to the National Institutes of Health -- but it is a huge number. These billions of dollars are used for, among other things, drug and pharmaceutical research and development. Who benefits from this? Well, first of all, of course, drug companies do.

Therefore, I do not need to drag out two or three hankies for all the tears shed for the horrendous costs that must be borne by the poor drug companies in their research and development. Those companies are getting a lot of help from Uncle Sam. The result: taxpayers pay three or four times, counting Prescription Drug Plan assistance for seniors utilizing it.

And let us not forget that much of drug companies' "research and development" pertains directly to market research and development, not drug research and development. Please let us also not forget the millions of dollars spent on drug company advertising. While we are on the subject, let us also not forget the tax write-offs drug manufacturers receive from the government for research and development, and, of course, advertising. And don't forget manufacturing, either. Tax write-offs for companies using knowledge created by government-paid personnel do make me somewhat irritable.

Let us also not forget that there are many occasions where drug companies pay off generic manufacturers not to manufacture generics. That way, the original patent holder can extend the time frame during which it may continue charging the highest prices. Sometimes the companies get caught at this game, but not always.

It probably is not nice to instill fear, but it is nice to instill information. Attempt to learn how many foreign manufacturing facilities are utilized by American drug manufacturers. The numbers are unknown, but perhaps they can be rooted out by a good TV journalist/writer. John Stossel, maybe?

After discovering how many foreign manufacturing facilities are in use by American drug companies, then attempt to learn how often the FDA inspects these facilities. Attempt to learn how diligent these inspections are. If you happen to be taking a medication in its original bottle that was purchased here in the U.S., try to find the country of manufacture. If you are able to find this on these bottles, it will truly mess with your mind.

In the event anyone noticed, I do not weep for drug companies.

As for Medicare, or, in this case, the Department of Health & Human Services, "negotiating" lower drug prices on behalf of the Medicare Prescription Drug Plans, please, Democrats, just think about this before voting for it. That goes for a few Republicans and perhaps Independents, too. There is the same problem here as with the Medicare Modernization Act: too many middlemen.

And here is a little-known fact: some of Wal-Mart's (and perhaps others') generic drug prices are lower than those of the VA. There is absolute proof of that. All one needs to have are copies of the formularies used by both entities.

Competition, free enterprise, plain old capitalism, along with supply and demand, will lower drug prices. Remember Milton Friedman's "Free to Choose."

We are not now free to choose.
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