E-drug: Holding down drug prices
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Holding Down Drug Prices
NYT Editorial
New York Times, 28 November 2003
http://www.nytimes.com/2003/11/28/opinion/28FRI1.html?th
Now that Congress has passed a costly prescription drug benefit for
older Americans - a bill that we endorsed to close a glaring gap in
Medicare - it is imperative to find strong tools for restraining drug
costs. The drug benefit is projected to cost $400 billion over the first
10 years and perhaps $1.5 trillion or more over the following decade.
Without cost restraint, it will impose huge financial burdens on future
generations.
At Republican insistence, the drug benefit was designed to avoid any
possibility of the federal government using its bulk-purchasing power
to demand low prices. That sets drugs apart from the rest of the
Medicare program, which routinely dictates low prices for reimbursing
hospitals and doctors for the services they provide. The drug program
will rely instead on private pharmacy benefit managers to negotiate
good prices. Those companies will have more bargaining clout than
an individual elderly person but far less than the federal government.
Unfortunately, their loyalties are suspect. Some big pharmacy benefit
companies have been accused of taking rebates from manufacturers
to promote their most expensive drugs over cheaper alternatives.
We can think of two additional approaches to reducing costs that
should have wide appeal. The first is to alter the drug industry's global
pricing patterns. Drug companies now charge what the market will
bear in this country and sell at lower, government-dictated prices in
other industrialized nations, effectively forcing American consumers
to pay for research that benefits the rest of the affluent world. The
Bush administration needs to instruct the United States trade
representative to press for a fairer pricing system, or else Congress
should take up again the notion of allowing reimportation of low-cost
drugs, not just from Canada but from Western Europe as well.
Another appealing approach would have the federal government
finance research comparing the effectiveness of competing
brand-name drugs, thus providing data on which drugs work best and
are presumably worth more. The bill just passed provides a modest
$50 million to get trials started, but the effort needs to be more
ambitious. Ideally, the Food and Drug Administration should also be
empowered to demand that new drug candidates be compared
directly against existing drugs, not simply against a placebo. If market
forces are to be the main mechanism for restraining prices, the
market needs a lot more information than it is now getting.
Beyond that, it will be important to accelerate several current trends.
State governments should use their buying power to get good deals
for their employees and Medicaid patients. All purchasers of drugs
should use formularies or tiered pricing to encourage the use of
cheaper drugs. The federal government should press for greater use
of low-cost generic drugs and, where it is safe to do so, move more
brand-name drugs from prescription status to over-the-counter status,
almost surely reducing their cost.
But even after all feasible price restraints are imposed, Congress will
still have an obligation to ensure adequate financing of the drug
benefit. Every member of Congress who voted for the Bush
administration's reckless tax cuts ought to shrink from extending them
when they expire, freeing up plenty of money to pay for drugs. Our
guess is that most Americans, if forced to choose, would prefer
medicine over a modest tax benefit.
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