Drug companies: Prepare to be Philip Morrised

Vermont and Maine legislators are working on bills that will force drugmakers to lower their prices on prescription drugs to the same levels seen in Canada.  If drugmakers refuse to comply, they would be prevented from selling their products in these states.

Realizing that their two states are tiny and represent only a small fraction of the market for giant multinational pharmaceuticals, the governors of Vermont and Maine are attempting to form a coalition with 9 other states in the Northeast - a coalition that drug companies could not ignore.

At issue is the large discrepancy between drug prices in the U.S. and prices in other countries - in this case, Canada.  For instance the price for 100 tablets of Relafen (an arthritis drug) was recently priced at $116 in Maine, and $59 in Canada.  Senior citizens in border states have abandoned their bus trips to Atlantic City in favor of bus trips to Canada in search of bargain drug prices. 

The Pharmaceutical Manufacturers of America view the action as a potential "atomic bomb."  Drug companies say that the price discrepancies exist for good, sound, fundamentally correct economic reasons, and do not represent price-gouging or any other sort of ethically-challenged behavior.  If only people would take the time to understand the complex financials, they say, they would see that the drug companies are entirely righteous in the matter.

Legislators and their constituents - senior citizens who can't afford their prescription drugs without going to Canada - are not inclined to study the complexities plaguing the drug companies. They would rather look at the rapidly rising cost of prescription drugs, the single largest factor in increasing insurance premiums; and the fact that drug companies profit margin is said to be 4 - 5 times higher than that of the average Fortune 500 company.  Not to mention that it generally costs only pennies to make pills that routinely bring prices of $2 - $10.

State Senator Chellie Pingree, the Maine Senate majority leader, declares, "The pharmaceutical industry is starting to look like Big Tobacco." (quote from AMAnews, March 20, 2000)

DrRich comments:

Senator Pingree is on to something. The lawyers, having made a huge killing from Big Tobacco, are spreading out and targeting other industries they can paint as behaving in a malevolent (though entirely legal) fashion.  People who manufacture handguns, SUVs, dairy products, and other items that spread societal evil had better watch out.

Now we add to the list the of societal malefactors the pharmaceutical industry.  

I don't understand international drug pricing methodologies any better than Senator Pingree.  Maybe there is some price-gouging going on.  If so, it ought to be investigated, prosecuted and corrected.

But for government to legislate price levels for prescription drugs would set a dangerous precedent.  In the long run, this precedent would end up a greater societal evil than anything that drug companies - or even the American Dairy Association - are doing. If drug companies know that legislators can place an arbitrary price (and profit) cap on their products at any time, they will stop plowing billions of dollars a year into the research and development that makes new products possible.

Of course, there is a school of thought that holds that medical progress has gone far enough; that further advances are just going to increase costs; and that stifling R & D isn't so bad. So by some lights, legislated price controls are just the thing.  Time will tell whether the legislators in Vermont, Maine and 9 other Northeastern states fall into this camp.

03/29/2000

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