What about pharmaceutical costs?

Reform without drug price limits? That's sick

By Melody Petersen

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In the debate on health care reform, one remedy for skyrocketing medical costs rarely gets mentioned: allowing the government to use its substantial buying power to negotiate lower prices for medicines.

The drug companies, with the help of hundreds of lobbyists, have succeeded in keeping this proposal off the table, even though studies have shown it would save billions of dollars a year.

If health care legislation is signed into law with no controls on drug prices, the pharmaceutical industry will have a financial bonanza. Drug companies will get millions of new customers while continuing a system that leaves the United States as the only country in the developed world that lets the industry charge more or less what it wishes.

The United States spends $300 billion a year on prescription drugs — twice as much as we spend on higher education. We spend more on medicines than do all the people of Japan, Germany, France, Italy, Spain, Britain, Canada, Australia and New Zealand combined.

Drug executives have long believed that Americans should eagerly fork over this money. They say we shouldn't think twice about paying an average of $120 for each brand-name drug — up from an average price of $65 in 2000.

If prices were limited, the executives warn, companies would be forced to cut back on scientific research and Americans would get far fewer new medicines. Discovering a drug can take more than a decade, they say, and run up a research bill approaching $1 billion.

But do their theories hold up? No. It's painfully clear that we're not getting our money's worth from what we pay for medicines.

It's true that discovering a new lifesaving drug is expensive. Whether the cost is as high as the industry claims continues to be a matter of fierce debate. The drug companies have refused to allow outside scrutiny of what they spend in their labs. In fact, the companies' actual research costs are one of the industry's most closely guarded secrets.

But there's a bigger issue that has largely escaped public scrutiny. Over the last 30 years, the industry hasn't focused its efforts on discovering those truly amazing innovations that can change the practice of medicine. Instead, the companies order their scientists to turn out mostly rehashes of medicines already being sold. It's far less expensive to copy a medicine — tweaking a molecule just enough so it gets its own patent — than it is to do the years of work needed to find new and better cures.

This focus on copycat medicines is apparent in the list of drugs approved by the Food and Drug Administration. Of the medicines approved between 1990 and 2004, only 16 percent were what government reviewers deemed to be actually new and significant. The rest were medicines we were using in a slightly different form.

With no price controls, the industry gets away with charging exorbitant amounts — even for drugs that barely work. Take Erbitux, a cancer drug sold by Bristol-Myers Squibb. An 18-week course of the drug can cost as much as two BMWs. Yet that course of Erbitux has been shown to extend the lives of lung cancer patients by little more than a month. It's hard to see how this is anything other than executives taking advantage of patients desperate for a ray of hope.

As other countries limit prices, the drug companies have looked to Americans to pay more. Medicine prices elsewhere are 35 percent to 55 percent lower, according to the Congressional Budget Office. A logical outcome of this: Americans are paying for pharmaceutical research that people all over the world benefit from.