December 24, 2003

I Just Can't Leave 'em ALone!

I've written extensively about the Medicare Bill both here and elsewhere. Now comes the confirmation that of all the things the bill is intended to do, actually lowering drug prices is NOT one of them.

To be sure, much of the stated intention of the bill is to lower drug costs to the elderly with huge drug bills. And to some extent it actually does that, by shifting the cost burden to the taxpayers. But it doesn't do a single thing to control the extortionate price of drugs that led to millions of Americans buying their drugs from Canada and other countries. Quite the opposite--by tapping into the Treasury, the bill gives pharmaceutical companies a blank check to continue making huge profits stiffing U.S. consumers with much higher prices than they sell those same drugs for elsewhere. This is why the drug companies were all in favor of the bill, and massively lobbied for its passage.

It's also why the bill specifically prohibited states and cities from negotiating price agreements on their own to reduce the cost burdens they face. Predictably, those same cities and states, faced with sharply rising drug costs both under Medicaid programs and their own self-funded health plans and with the ban on price negotiations that by itself constitutes a huge unfunded federal mandate to pay extortion to the drug companies, are exploring and establishing their own deals with Canadian drug suppliers, which has the FDA frantic. The FDA is going to great lengths to discourage the practice, which is illegal under federal law. To do so, they not only are loudly threatening legal action against the cities and states, but also trotting out the old "foreign drugs are not safe" argument.

Canadian drugs are susbstantially cheaper for two major reasons. The first is that under the Canadian health care system, the individual provinces are allowed to negotiate prices with the drug companies. The second is that Canadians aren't stiffed the same "premium" for drug development costs that U.S. consumers are. So Canadian drugs are cheaper because they can negotiate prices, and because American consumers already subsidizes the lower price of foreign drugs by soaking up those development costs themselves.

Remember, these are the same drugs, produced by the same companies, that Americans get. The drug companies tried the "foreign drugs aren't safe" argument briefly during the debate on the Medicare Bill, but quietly dropped it when people started asking why drug companies were manufacturing and selling unsafe drugs to Canadians. Now the FDA has taken up the baton to justify the support of a pharmaceutical monopoly price structure, and the massive giveaway of American tax dollars to drug companies.

And it still doesn't wash. A revolt is brewing over this massive unfunded mandate, and it's not going to get smaller. There is no good reason for Americans to be charged more than others for these drugs. If passing the development costs on to consumers in other countries is a problem, it's a problem for those countries. And there is absolutely NO good reason to ban states and cities from negotiating their own drug prices, rather than getting stuck with a full-price mandate from the federal government.

But hey, you already knew the drug companies really liked the Medicare Bill for good reasons, didn't you?

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