CONTROLLING DRUG PRICES

Clearly, we need better regulation of drug prices and the drug industry in the U.S. Unwarranted, steep increases in drugs’ prices and higher prices than in other countries are key indicators of the need for better regulation to lower prices. And, as recent investigations have uncovered, this applies to the generic drug makers as well as the brand name drug makers. It is estimated that if there were a truly free market for prescription drugs in the U.S., they would cost $80 billion instead of $430 billion, an annual savings of $350 billion. (See my previous post for more information.)

Three bills have been introduced in Congress to address the high and rapidly rising costs of prescription drugs in the U.S. They have been introduced in the Senate by Senator Sanders of Vermont and in the House by Representatives Khanna of California and Cummings of Maryland.

First, the Prescription Drug Price Relief Act would terminate patents, ending monopoly rights, for any drug whose price exceeded the median (middle) price among five comparable countries: Canada, the United Kingdom, France, Germany, and Japan. Drug prices in these countries are roughly half of what they are in the U.S., so our drug prices would come down substantially under this law. It is expected that drug companies would lower prices voluntarily if this law is passed; they wouldn’t want to lose their patent protections because, if they did, competition would likely drive prices even lower.

Second, the Medicare Drug Price Negotiation Act would allow Medicare to negotiate the prices it pays for drugs. Given that it spends roughly $100 billion a year on drugs, almost a quarter of all drug purchasing, it has substantial negotiating power. When the Medicare drug benefit was created, the Republicans in control of Congress and President George W. Bush did the pharmaceutical industry a huge favor by prohibiting Medicare from negotiating drug prices and also prohibiting the importation of drugs. The Veterans’ Administration and every private health insurance company, as well as every other country, save substantial amounts of money by negotiating drug prices with the drug manufacturers.

(In a classic case of the revolving door between government and industry, Representative Tauzin, chair of the committee that wrote the Medicare prescription drug law, resigned two months after the bill was signed into law to become the head of the pharmaceutical industry’s trade association at an estimated salary of $2 million. His pay would increase to $11.6 million five years later.)

Third, the Affordable and Safe Prescription Drug Importation Act would allow the importation of drugs from other countries with safety standards comparable to those in the U.S., such as Canada and Germany. This would be a step toward a truly free market, something our business community rhetorically supports, and would significantly reduce drug prices given that prices in these countries are roughly half of what they are in the U.S. The charge by opponents that this would let unsafe drugs into the country rings hollow because many of our drug companies themselves import the drugs they sell or ingredients for them – largely from China.

I urge you to contact your U.S. Representative and Senators to ask them to support these three bills. It is time to reduce the exorbitant profits of the drug makers by reducing the exorbitant prices of the drugs they sell. Furthermore, reducing their high profit margins would reduce the incentive to engage in fraudulent practices to promote additional sales of their drugs.

You can find contact information for your US Representative at http://www.house.gov/representatives/find/ and for your US Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.