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The Real Prescription Drug Problem

The Cynic
cynic@politicalusa.com  

PoliticalUSA.com
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I am not a fan of the town-hall format for debates. More than anything, it lowers my opinion of the average American voter. Watching these folks reciting their what-are-you-going-to-do-for-me questions that they supposedly had written and pretending to be interested when the candidates respond does not make for intriguing politics. The candidates address the person by name, brush off the question and then go on to reciting a stump speech. It's poor theater.

That being said, I was impressed by one particular question by an audience member. Marie Payne Clappey stood up and asked a question that every real journalist has ignored. In referring to prescription drugs, she asked:

"Are either of you concerned with finding some feasible way to lower the price of pharmaceutical drugs, such as education on minimizing intake, a revamp of the FDA process or streamline the drug companiesí procedures instead of just finding more money to pay for them?"

Neither candidate answered the question. Each went into describing their own plan and never addressed process, only investment. This is exactly why we should keep the government out of the health system. Each of the candidates seems to believe that money will solve each and every problem, when all along process has been the more likely culprit. Throwing money at failed process does nothing more then to put a Band-Aid on a particular problem. 

To solve the problem of high prescription drug prices you need to understand how the prices are set. When a drug manufacturer creates drugs it's incentive is to make money. They are not humanitarians and they want drugs to be profitable. Each and every drug has millions invested in it before it evens applies for FDA approval. They want this money back. Not only that, they want to get back money spent on research that never resulted in anything. (Now before you go calling them greedy, you need to understand that profit is not a bad thing. Without profit, the drug companies have no incentive to innovate. It is innovation which gives us the drugs we need to live longer and healthier.) 

Now if they create a drug called Moronica, they could easily spend $3 million on research and development alone, they can spend another $1 million on trial testing, another $500,000 complying with FDA standards and patent lawyers fees and then, once the drug has been approved, another $2 million on product marketing and promotions to doctors. So the cost of that first Moronica tablet will be $6.5 million. Every successive tablet may only cost a few cents. 

The drug company has a monopoly on Moronica for about 17 years, and then other companies can manufacture the drug under a generic name from that point on. In order to price Moronica, the drug manufacturer must take the initial startup costs, add the actual manufacturing costs, then divide by the estimated consumer consumption over the 17 years of exclusive market exposure. The manufacturer will then tack on a profit percentage (this percentage will vary based on competition, need, money spent on similar research, etc.). They then arrive at actual per pill pricing.

Using tax money to address the high prices of medicine does zilch to the actual price. It's more or less a paper shuffle. It's the government's way of saying, OK I'll take X amount from you and give it to him to pay for his prescription medicine. Using Medicare to pay for drugs can also open us up to the same problems we have with Social Security and Baby Boomers: too many retirees, not enough money to pay for their needs. 

The process can be tweaked. If we were to lower or raise the length of the patent it would change the per pill price of these drugs. Lowering it would drive the price up when a drug is new, but allow for the cheaper generics to be available sooner. If we lengthen the patent it would drive the per pill cost down but delay the availability of generics. We could give tax incentives to drug manufacturers who develop separate pricing plans for the elderly. 

Realistically, the best plan would be to lengthen the patent to either 25 years or to allow for permanent patents with an ability for manufacturers to sell or license their patents to competitors. If a manufacturer is having a down time with new developments, they could easily liquidate some of these patents to raise capital for new research. 

I am not so sure there really is a prescription drug crisis in this country. I know there will always be elderly people in our country that struggle to make ends meet. Prescription drugs is more likely an issue to get the high voter turnout elderly to vote one way or the other. Our government has a surplus that they are looking to spend, and there seems to be no better way for them to spend it than buying votes.

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© The Cynic, 2000


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View expressed are those of the author and do not necessarily reflect those of Political USA.


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