Jewish World Review Nov. 15, 2004 / 2 Kislev 5765

Drs. Michael A. Glueck & Robert J. Cihak

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Consumer Reports


What's the right price for pharmaceutical drugs?


http://www.NewsAndOpinion.com | In the heat of the recent presidential campaign, simmering health care questions received a lot of media attention. Should Americans be allowed to import cheaper drugs from foreign countries? Do we pay more than our share of pharmaceutical costs?


Let's start with individual Americans importing drugs from foreign countries.


Done. Although it's against rarely-enforced laws, American consumers already purchase millions of dollars worth of drugs from other nations, especially Canada.


However, consumers are discovering that many drugs are cheaper in the U.S. than they are in Canada - sometimes far cheaper.


In recent months, a task force led by the U.S. Surgeon General's office found local drug stores such as Costco or Walgreen significantly less for generic drugs than similar drugs cost in Canada.


"How so?" you may be wondering.


One factor is that some socialized countries, such as Canada, exercise more control over the production and marketing of generic drugs than is the case in the United States, increasing the cost of entry into the business resulting in many fewer companies competing and significantly higher prices.


For buying prescription drugs under patent, these countries typically set up a centralized system for the whole country, a monopsony. A government might tell the drug company, "We'll pay you $XXX for this drug. If you don't like that, we won't buy from you. And we won't protect your patent in our country. In fact, we'll sponsor a company to make the drug right here." Egypt gave this message to the Viagra patent holder.


In the short run, the cost of patented medications is often cheaper for patients in the socialized country. In the long run, price controls discourage innovation in the drug manufacturing industry, drive out competition, decrease supply and increase total health costs. The money costs can sometimes be kept down. But the health costs continue to add up, resulting in suboptimal health.


In effect, this means Americans have a wider range of drugs available, frequently at lower cost, than their counterparts in prosperous foreign countries with controlled pricing. When unleashed, our huge consumer market of individual shoppers drives prices lower than any government mandate possibly could.


But who really cares about drug costs?

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Not surprisingly, patients who don't pay for drugs usually don't even bother to ask what they cost. For example, a friend recently had a heart attack. While I was visiting him in the hospital, the attending nurse mentioned that the small bottle of blood thinner in the IV cost over $1000. Nobody blinked. Medicare covered it. If the patient and his family were paying, they might well ask whether other medicines might do the job.


Likewise with physicians. When insurance is paying the bill, doctors have no incentive to prescribe or even suggest lower cost alternatives. Even though many common conditions, such as high blood pressure, can be treated effectively with several different classes of drugs, including cheaper generic drugs no longer under patent protection, some doctors blithely prescribe the latest drugs on the market, regardless of cost.


So who, besides posturing politicians in the middle of a campaign, REALLY cares about costs? The answer: nobody - unless the consumer is paying the bill.


Drug, and health care costs in general, are rising more rapidly than would otherwise be expected because patients - the recipients of the products - aren't the purchasers. Managed care organizations, insurance companies and governments are.


Patients spending their own money with the advice of their doctor are often motivated to find the most cost-effective way to manage their health and medications. But not always. Many people buy elective services like liposuction or eye surgery because they perceive value - and they're willing to pay for it out of their own pockets.


Some individuals want more doctoring, others less. Similarly with prescription drugs, lasagna, opera, rock concerts and just about everything else.


Although the federal Food and Drug Administration (FDA) unnecessarily delays the introduction of many new drug products, Americans still have a wider variety of drugs available to us than do those in many socialized countries. Freedom from excessive regulation and controls, and allowing patients to choose among competing private-sector health options, will serve our needs the best in the long and short run.


The "right price" for any drug is the price the consumer is willing to pay, taking into account the medical status of the patient, the risks involved in different treatment options and the resources chosen to address the problem.


For the consumer, finding safe, affordable and effective drugs is the goal. We'll achieve that goal best when patients are back in the driver's seat.

Editor's Note: Robert J. Cihak wrote this week's column




Michael Arnold Glueck, M.D., is a multiple award winning writer who comments on medical-legal issues. Robert J. Cihak, M.D., is a Discovery Institute Senior Fellow and a past president of the Association of American Physicians and Surgeons. Both JWR contributors are Harvard trained diagnostic radiologists. Comment by clicking here.

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