Drug costs clearly will be an issue in 2004 election campaigns. Voters see high drug costs as a national problem.
Candidates are responding. Many are quick to paint pharmaceutical companies as greedy villains, but most are unwilling to risk much in their proposed remedies. It is time for bolder thinking.
We could try the European approach: Impose strict price controls on drugs and further limit adopting new ones. If we drive drug firms away as Germany and France are doing, we might enjoy the benefits of low-priced pharmaceuticals without having to pay the heavy costs of research and testing.
Germany was an early pharmaceutical powerhouse. It led the industrial revolution in chemistry in the late 1800s while German researchers such as Robert Koch and Paul Ehrlich laid the foundations of modern medicine. Bayer, Hoechst and other German firms enjoyed world renown for their drug research, and Germany led drug exports for decades.
Today, European drug manufacturing is slipping. Ten years ago, Europe and the United States spent roughly equal amounts on drug research — $10 billion each. Today, the United States spends about $30 billion, and Europe spends $20 billion. In Germany, drug R&D fell from 1992 to 2002.
New research shows a link between drug price controls in European countries and their national drug industries. Ten years ago, per capita spending on drugs in Europe was 30 percent lower than in the United States. Today, it is 60 percent lower. Europeans’ annual savings top $160 billion. That ain’t lab-rat feed.
The lower per capita spending, however, is driving the drug industry from Europe to the United States. During the last five years, nearly twice as many “new molecular entities” were produced here as in Europe, a sharp increase from earlier periods. Novartis, a Swiss firm, moved its research operations to Boston. British GlaxoSmithKline may move its headquarters to Philadelphia. In the last 10 years, growth of U.S. pharmaceutical jobs outstripped Europe’s by 42 percent.
Such vitality comes at a price. We pay more for drugs than anyone else in the world. The head of the U.S. Food and Drug Administration openly asserts that U.S. drug prices are higher because “our country is paying the bulk of the costs of developing new treatments.”
So, how do U.S. citizens get out of being global patsies? Simple: Do what Germany is doing. Drive the drug industry somewhere else. Make some other suckers pay the freight. We have a big drug market, but if we ratchet down prices enough, pharmaceutical manufacturers eventually will move away.
They can move to Japan or any other country willing to accept them. Then, we can import drugs from those nations under the same price controls Canada and Germany use. If we get rid of our domestic drug industry, political opposition to imports from Canada and elsewhere will vanish.
Now why don’t any of the candidates propose this simple solution? Or is there some downside that hasn’t been mentioned — such as the loss of more jobs or a key industry, perhaps?
© 2004 Edward Lotterman
Chanarambie Consulting, Inc.