Who pays for prescription drugs?

Print More

(Host) Although the high cost of medication has been much debated lately, commentator Dick Mallary thinks that most of the proposed solutions are too short sighted.

(Mallary) One of the most contentious political issues these days is the cost of the new high tech pharmaceuticals. And, the biggest issue is why Americans pay so much more than anyone else.

There is no question that many of these new drugs are remarkable. They treat diseases never before treatable. They accomplish cures that were previously impossible.

But, many of them are extraordinarily expensive in this country – beyond the capacity of many people to pay for them.

Much of this results from the enormous complexity and cost required to discover them, synthesize them, test them for safety and efficacy and, finally, to manufacture them.

For every successful new pharmaceutical there are many failed experiments, blind alleys pursued, safety problems discovered or regulatory approvals denied. The companies need to recover their costs from the sale of the successful drugs that are permitted to come to market. And, they must collect those costs during the limited period when they have exclusive patent protection on their discovery.

But why do U.S. citizens have to pay so much more for them than everyone else? Why did Americans pay 47% of the total worldwide pharmaceutical expenses in 2002 when the United States has only about 5% of world population?

This happens because there is not an open, free competitive market for drugs around the world. In most of the developed world there are government or publicly mandated health systems that determine what drugs may be used and what they will pay for them. In the poor countries of the less developed world, people and governments cannot afford the cost of these drugs. So, since the drug companies cannot recover a proportionate share of their costs elsewhere, they raise the price in the United States to cover their costs. When they get less money elsewhere, they charge more in the U.S.

Reimporting drugs from Canada or Mexico is a popular and politically expedient remedy to the problem, but it is not a large-scale or long-term solution. If enough Americans acquire their drugs at foreign controlled prices, the companies’ revenues will decline and they will raise prices further in the U.S. If we try to solve the problem by mandating lower prices in the U.S and the companies can’t recover their investment, they will do less research and development.

We are confronted with worldwide regulatory schemes designed to give most populations a free ride on American pharmaceutical research. It’s not just that Americans pay too much; it’s that other rich nations pay too little.

We should find a way to make drug companies who sell their product in the U.S. set their prices for other countries to be proportionate to each country’s wealth or ability to pay. This would be a complex process to establish, administer and police, but it would be a way to make the affluent citizens in the rest of the world pay their fair share of the life saving drug research done in America.

This is Dick Mallary in Brookfield.

Comments are closed.