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.
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