Politicians on Drugs
Politicians love things that sound good, no matter what the real world consequences might be. Perhaps it’s a function of making much of their livelihoods through sound bites, 30-second TV ads, and bumper stickers.
Unfortunately, too many politicians take the campaign mentality into elected office with them. That means we often get policies that might sound good, but upon a little serious reflection can be counter-productive. That’s exactly what’s going on right now with prescription drugs. In this instance, the costs of bad policy include more deaths in the United States and around the globe.
Various elected officials, both Democrats and Republicans, have fallen in love with the idea of allowing people to purchase their prescription drugs from other countries at deeply discounted prices. What a great deal! Who could possibly be opposed to allowing senior citizens on tight budgets to buy their medicines at lower prices from, for example, Canada? For good measure, politicians get to score political points by tapping into populist impulses by attacking “big business,” in this case pharmaceutical companies.
In Massachusetts on October 28, a congressional forum turned into what one reporter called “a pep rally for advocates of legal drug importation.” The forum was put together by Republican Rep. Gil Gutknecht from Minnesota and Vermont Rep. Bernie Sanders, an Independent known well for his socialist stances. Apparently, no one opposing drug reimportation was invited to speak.
Various governors, such as Democrat Rod Blagojevich of Illinois and Republican Tim Pawlenty of Minnesota, are advancing plans to allow for prescription drug purchases from Canada.
At the Massachusetts rally, one professor reportedly declared: “We can’t afford not to do reimportation because people’s lives are at risk.” The professor was right to say that lives are at risk, but he got the issue backwards. Importing prescription drugs from nations that impose price controls, such as Canada, ultimately will cost lives.
The reality of allowing prescription drugs to be imported from nations imposing price controls means importing those price controls. But what exactly results from price controls?
Let’s understand the process of developing new medicines. The Pharmaceutical Research and Manufacturers of America points out that, on average, it takes 10 to 15 years to develop a new drug. Meanwhile, only 20 out of 5,000 compounds screened enter preclinical testing; and only one in five drugs entering clinical trials is approved. The average cost of bringing a drug to market is more than $800 million.
The bottom line is clear – developing life-enhancing and life-saving drugs is a costly, high-risk enterprise. Price controls quite simply amount to a tax on innovation and invention in prescription drugs. Whenever you tax something, you get less of it. Price controls vastly diminish the incentives and reduce the resources available to research and develop new and improved medicines.
Currently, the U.S. is the global leader in developing new drugs. One key reason for this is the fact that many other countries impose prescription drug price controls, and we do not. It is no coincidence that, as The Wall Street Journal recently reported, the United States accounted for 70 percent of sales of new medicines in 1998.
Cheaper drugs sound great, and politicians love telling people that they are in favor of cheap drugs. But importing price controls from other countries is a dangerous and deadly policy. When it comes to prescription drugs, it’s time to put aside the cheap politics, and instead allow the pharmaceutical companies to proceed with the serious and important work of developing new and improved medicines to truly help people.
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Raymond J. Keating serves as chief economist for the Small Business Survival Committee.
