Evil drug companies at it again, and what we can do about it

Big pharma - represented by The Pharmaceutical Research and Manufacturers of America - has taken its case against state-mandated drug discounts to the Supreme Court. 

The drug companies are trying to halt implementation of a program in the state of Maine, called Maine Rx, which proposes to leverage the state's Medicare population in order to generate discount drug prices for patients who do not have insurance for prescriptions.

Maine Rx is supposed to work thusly: The state government, invoking their authority under the Medicaid program, would require drug manufacturers to negotiate rebates for prescription drugs for the state's drugstores.  The rebate fund (a fund to which only drug companies would contribute) would then be used by the drugstores to sell prescriptions to patients at discount prices.  Further, if prices were not brought under some control by this program within three years, Maine would impose price controls. 

Maine Rx was supposed to go into effect in 2000, but has not been implemented because of the constitutional challenge brought by the PRMA.  The Supreme Court heard arguments related to this case in January.

DrRich Comments

DrRich does not understand the constitutional challenge posed by PRMA, and judging by some of the questions asked by the Justices during oral arguments, neither did the Supremes.  The constitutional issue has something to do with the fact that Maine proposes to leverage its authority relative to Medicaid patients to generate discounts for self-paying (i.e., non-Medicaid) patients.  Medicaid regulations, PRMA holds, aren't supposed to have anything to do with non-Medicaid patients.

The constitutional issues aside, the real issue is whether governments, either state or federal, will find a way to impose price controls on the drug companies.  If they do, it will amount to a cap on profits. To the extent that drug-company profits are evil works of the devil, that's good.

But to the extent that profits are the motivation for pharmaceutical companies to spend billions a year on finding new treatments for sick people, that's bad.

So what's the solution?  Glad you asked!  DrRich, as usual, has a modest proposal.

The real problem, it seems to me, is that patients continue to insist on only the latest, most modern, and thus the most expensive drugs, while at the same time complaining of the cost. Hearing these complaints, government officials are trying mightily to find ways to cap drug prices, thus capping drug company profits.  This loss of profit potential will, in turn, ultimately halt the flow of these latest, most modern and expensive drugs.  Drug prices will end up lower, but we will be stuck with the drugs we have today, with little hope of future innovation.

So here's the solution: Let's pretend we have price controls, and that, indeed, they've been in place since, say, 2001. As a result, let's pretend that there haven't been any new drugs introduced since 2001.  So the only drugs we will be willing to buy (we all tell ourselves) are the old ones, which - being old - will be relatively cheap. If our docs try to prescribe something newer, we will sharply correct them.

By this simple mechanism, by merely agreeing to pretend, we can achieve overnight (for ourselves, at least) the very result we are struggling mightily to achieve through state legislatures and the courts - lower prices with no innovation. 

The beauty of this plan is that not everybody needs to participate. In fact, only those people who really, honestly feel that drug prices should be capped need to do so. They can take their chances with yesterday's technology, frozen in time. Everyone else, by their own personal choice, can continue to pay inflated prices for the new stuff if they want to, poor saps.  But at least it will be there if they want it. 

February, 2003

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