2003 October 06 Monday
Medicare Drug Benefit Could Lead To Less Drug Research

David Gratzer of the Manhattan Institute argues that if the US federal government starts paying prescription drug costs then price controls and restrictions on which drugs can be used are highly likely outcomes.

At present, Washington plays a modest role in the purchase of prescription drugs. Apart from funding in-hospital prescriptions for VA and Medicare patients, the federal government bears little of the nation's annual $150 billion in prescription drug costs. Yet that's about to change in a major way. If Congress agrees on the prescription drug benefit for Medicare, the federal government will soon pay for about 20-25% of America's pharmaceutics, with influence over another 15-20%. More worrisome, though, is that if Medicare reforms go forward, Washington will become the biggest funder of prescription drug purchases in the world. With such a financial stake, Medicare bureaucrats will be tempted to directly control drug costs.

Experience overseas shows that governments that pay for prescription drugs tend to involve themselves extensively in both pricing and availability.

What is especially frightening about this prospect is that Europe already has lots of drug price controls and as a consequence US consumers effectively pay for the lion's share of money that goes into developing new drugs. The US market generates the profits that are the incentive for new drug development. If price controls come to the US as well then drug development efforts will be cut back and our life expectancies will be lower than they otherwise would be if prices stay unregulated.

Share |      By Randall Parker at 2003 October 06 03:32 PM  Socialism, Capitalism


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