Drug Price Controls that Really Work!

By ruling in favor of the Maine Rx program last month, the U.S. Supreme Court nudged the pharmaceutical industry one step closer to the great abyss – to price controls on drugs. Under the Maine Rx program, drug companies wishing to participate in Maine’s Medicare program would be required to contribute to a special “rebate fund.” This fund is to be used to give non-Medicare patients discount pricing on prescription drugs, and unless this scheme brings drug prices under control within 3 years, Maine Rx stipulates, the state may then impose direct price controls on drug companies. By a 6 – 3 margin, the Court struck down the pharmaceutical industry’s challenge to Maine Rx, and the plan can now proceed.  Other states are now expected to enact similar plans.

The problem, of course, is that if the potential for reaping large (obscene, if you insist) profits from new drugs is significantly reduced, the hugely expensive process necessary for drug companies to bring new drugs to market will be proportionally curtailed.  So if we place price controls on drugs, then we’d better be happy with the drugs we have today, because those are likely the only drugs we’ll have tomorrow.  There are some who will be satisfied with this outcome, who point out that the majority of new medicines are “me too” drugs that the world can do without, like one more arthritis drug, or yet another allergy pill, or worse, lifestyle drugs like Viagra or Botox.  Individuals who feel this way would sacrifice pharmaceutical progress for a saner pricing policy.

Others of us, on the other hand, appreciate the fact that every few years some truly earth-shattering drug will hit the market – one that significantly improves the odds of beating a certain cancer, for instance, or that vastly improves one’s chances of surviving a heart attack.  We would think it a shame if progress on such drugs – even if they are but a few scattered islands in a sea of boutique pharmaceuticals – were to come to a halt, and even if for a good reason.  So here’s the question: can we have our cake and eat it too?  Can we bring down the price of the drugs we buy, while at the same time allowing at least some substantial advances to continue?

The answer, I am pleased to announce, is yes, we can.  And I humbly offer a plan to achieve this very end.  It is a system of voluntary price controls.  Of course, I’m talking here about us doing the volunteering – we the consumers – and not the drug companies. 

My Voluntary Price Control System works like this:

1) Individuals will declare whether or not they want to participate in a system of price controls on drugs.

2) Individuals who choose to participate in the price control system will receive reasonable, discount pricing on all available prescription drugs, such pricing to be fixed by a sympathetic governmental agency whose makeup includes a wide diversity of representation.

3) “Available prescription drugs” under this price control system will be any drug whatsoever appearing in the U. S. Pharmacopoeia, as long as that drug has been on the market for at least 5 years.

4) Individuals who choose not to participate in the price control system will be charged whatever the drug companies feel like charging, but will be allowed to receive any drug as soon as it is approved for marketing.

5) Individuals may switch their status (between participant and non-participant) only during one 30-day window every 2 years, determined by their month and year of birth.

Why my Voluntary Price Control System is brilliant:

For drug companies it is the prospect of making large profits from new drugs, and only that prospect, that drives drug development. So as long as we want new drugs we’ve got to allow for the profit incentive to continue, as odious as we may believe that to be.  The beauty of my system is that it maintains at least some of the profit motive – to the extent that citizens opt to be non-participants. Given the growing hue and cry for price controls, we can confidently predict that only rich people will opt for this non-participant status. Therefore, a side benefit of this plan is that the rich – those who, after all, can afford it – will fund virtually all progress in drug therapy.

If we had a universal, mandatory price control system, drugs available to our citizens would be essentially “frozen in time,” and henceforth there would be little or nothing new under the sun.  Under my system of voluntary participation, access to new drugs also would be restricted for participants. Yet, my voluntary system is decidedly more advantageous to its participants than would be a universal system, since drug progress would continue. Further, as new drugs matured in the marketplace – and after their hidden dangers and side effects revealed themselves, during the 5-year “shakedown period,” on the physiology of the wealthy – these drugs would (eventually) become available to plan participants, and at a discount to boot. The bottom line: a 5 year lag in gaining access to new drugs is vastly better than never having any new drugs at all, especially when the burden of paying for all that drug development falls entirely on someone else.

So, while at first blush you may not like my system – it being two-tiered and all – on further reflection you will see that it is far better for everyone than a universal system of price controls. 

The punch line

The happy news is that, once you understand the wisdom of my proposal, you will be delighted to know that don’t actually have to wait for federal legislation and the establishment of a vast new price-control bureaucracy in order to participate.  You can participate today, right now, with nobody’s acquiescence but your own.

Simply “pretend” that the system is already in place, and that you are a participant, and that the only drugs available to you are the ones that have been on the market 5 years or longer.  When you see your doctor, insist – demand – that he/she prescribe only older drugs. This way, by avoiding the new drugs that are being sold at the highest premium, your personal drug costs will be remarkably reduced – just as if price controls were in place.  Indeed, if you really want to reduce your costs insist on only 10-year old drugs, or better yet, on generics.

Further, since there currently aren’t any price controls, drug companies are not yet constrained from investing in new drugs.  As long as this situation continues, there will be a steady stream of drugs reaching that magic 5-year status, and thus becoming available to you under your personal, voluntary price control plan. 

And best of all, if you were suddenly to develop a medical condition that clearly calls for one of the brand new drugs, one that wouldn’t be available to you under either my Voluntary Price Control System or a government-mandated price control system, you won’t need to wait 5 years in order to get your drug. You can simply ask your doctor to write you a prescription.

So: those clamoring for pharmaceutical price controls can have them today – this very afternoon.  They can do so in a way that places them in no worse a position (indeed, in a far better position) than if a mandatory price control system were in place, and without reducing the options for the rest of us.  Indeed, the only way it would make sense to continue demanding mandatory price controls would be if something other than reducing drug prices were the chief motivating aim.

Now, what do you suppose that could possibly be?

June, 2003

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