Re Drug costs; comments on
messages of Glen Schumann, Dick Gaffron, Dwayne Voegeli, Joliene Olson
The importance of state
negotiations with drug companies, as Dick Gaffron notes, is great. A group of
states might be better. Wider
involvement of the federal government as negotiator, particularly in Medicare,
as Joliene Olson proposes, would be beneficial. Moreover, despite some problems
and the need for safeguards, it would be useful to encourage the consolidation
or alliance of private insurance companies so that they could bargain with drug
companies on more even ground than they now have. In effect, legislation, state
and federal, should provide for the development of more countervailing market
power by those dealing with the powerful drug companies.
Dick Gaffron brings out an
important point in showing that price control (perhaps more precisely,
government bargaining monopoly) is not the only determinant of Canada�s low
prices. Canada does have a weaker dollar, accounting for a substantial cost
differential.
In any case, there is no
certainty than Canada�s price advantage will continue, as both internal and
external economic conditions may force a change.
Glen Schumann is correct that the
U. S. consumer subsidizes countries that have price controls. But when the U. S.
companies do not charge below their cost of production and still make profits,
as Dwayne Voegeli has pointed out, it is certainly no violation of any
international agreement. It is simply a case of common differential pricing,
little different from that involved in the prices different consumers negotiate
for cars of the same model or the prices students pay in tuition at the same
university (with the full-amount payer subsidizing those with various forms of
aid). Sales to underdeveloped countries, especially Africa, involve below
production cost, but virtually all countries have approved�and pushed the drug
companies to implement�this policy as a humanitarian (and political) necessity.
The cost of drugs is a major
problem, and both private business and government will have to contribute to the
development of a more equitable system of pricing. Yet the cost of drugs
constitutes a small fraction�perhaps 10 percent according to Uwe Reinhardt, one
of the leading experts on medical economics�of the overall problem of health
care cost. Numerous factors in addition to drugs push overall health costs
higher, and any serious solution must encompass all the issues together even if
no solution will ever satisfy everyone.
The problem of health care is
world-wide. Virtually all European governments are struggling with the problem.
Curtailment of some services is inevitable. Even the Canadian government is in
trouble, At the February meeting of the Council of the Federation,
comprising the provincial governors, much anger was directed at the central
government for cutting aid to the provinces while costs were rising 7-10 percent
a year. As reported in newspapers covering the conference, some delegates warned
that Canadian health care �as we know it� might not survive the end of the
decade. The governor of Alberta, the richest province, warned about withdrawing
from the national health care system completely.
Roy Nasstrom
Winona
