Report Warns of Drug Price Controls; Government Mandates Seen as Threat to Research and Development

The Washington Times (Washington, DC), December 8, 2004 | Go to article overview

Report Warns of Drug Price Controls; Government Mandates Seen as Threat to Research and Development


Byline: Marguerite Higgins, THE WASHINGTON TIMES

Government price controls on prescription drugs - if enacted - would hinder the development of new drugs, according to a study released yesterday.

The federal government is not allowed to interfere with price negotiations for prescription drugs that it will begin providing to senior citizens under the Medicare program in 2006. But in the past year, several bills have been introduced to give the government more authority.

Emerging biotechnology companies, in particular, would slash research and development if mandates for lower prices went into effect, said a report commissioned by the Manhattan Institute, a New York, business-oriented public-policy think tank.

The report comes as prescription-drug prices, along with health-insurance premiums, are skyrocketing ahead of the rate of inflation.

Drug manufacturers' prices on average jumped 7.4 percent from September 2003 to September 2004, more than three times the rate of inflation, according to the AARP, the membership group for senior citizens.

The Manhattan Institute study, written by University of Connecticut finance professor John Vernon, took a one-sided approach, researching only the potential downside from putting in price controls that would lower the cost of prescription drugs.

Mr. Vernon said he did not study the benefits of lower prices, but said that in historical context "the reduced spending for research and development outweighed the benefits of lower prices.

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Report Warns of Drug Price Controls; Government Mandates Seen as Threat to Research and Development
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