Alzheimer’s Disease costs the U.S. economy over $200 billion per year, about $140 billion of which is a direct federal budgetary cost to Medicare and Medicaid. On our present course, this cost will quintuple to $1 trillion by 2050. It is the major driver up the steeply rising health care cost curve. Given this context, the most important question for health policy is not the green eyeshade question of who-pays-how-much that has come to dominate questions of health care policy in Washington, but rather: How do we maximize the incentives for medical innovation to cure diseases that would otherwise be prohibitively expensive to manage, foremost among them Alzheimer’s?
That cost curve is actually more likely to have its slope sharply altered by a major breakthrough cure than to be subtly bent by tinkering with the rules of federal programs. Merck, Pfizer, Eli Lilly, Johnson & Johnson, and others are investing heavily in Alzheimer’s research. These projects are major long-term investments, and they depend on the potential for an appropriately enormous pay-off if they succeed.
Unfortunately, while President Obama’s budget includes a much-touted $100 million proposal for brain research, it also undermines far more significant incentives for private sector medical innovation.
America's pharmaceutical sector spends more than $50 billion in research and development. The total cost of bringing a new drug to market is now $1.2 billion according to the Tufts Center for the Study of Drug Development, in part due to regulatory compliance and litigation expenses. Given the inherent challenges presented by Alzheimer’s, the cost of a new miracle cure could well run many billions of dollars.
The policies advocated in President Obama's 2014 budget fail the test of encouraging and rewarding such enormously expensive and risky investment. In fact, the budget includes several huge steps backwards.
To start, the Obama budget would install mandatory price "rebates" for drugs sold to low-income enrollees on the Medicare Part D prescription drug program.
Part D currently employs a market-based structure in which private insurers compete for beneficiary dollars. Unique among entitlement programs, competition has brought the program in under projected cost estimates by 45 percent according to the Congressional Budget Office (CBO). And over 90 percent of seniors are satisfied with their coverage.
Phil Kerpen is president of American Commitment, a columnist on Fox News Opinion, chairman of the Internet Freedom Coalition, and author of the 2011 book Democracy Denied.
American Commitment is dedicated to restoring and protecting America’s core commitment to free markets, economic growth, Constitutionally-limited government, property rights, and individual freedom.
Washingtonian magazine named Mr. Kerpen to their "Guest List" in 2008 and The Hill newspaper named Mr. Kerpen a "Top Grassroots Lobbyist" in 2011.
Mr. Kerpen's op-eds have run in newspapers across the country and he is a frequent radio and television commentator on economic growth issues.
Prior to joining American Commitment, Mr. Kerpen served as vice president for policy at Americans for Prosperity. Mr. Kerpen has also previously worked as an analyst and researcher for the Free Enterprise Fund, the Club for Growth, and the Cato Institute.
A native of Brooklyn, N.Y., Mr. Kerpen currently resides in Washington, D.C. with his wife Joanna and their daughter Lilly.
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