Academic journal article Policy Review

Rage against the Cure: The Health Hazards of Pharmaceutical Price Controls

Academic journal article Policy Review

Rage against the Cure: The Health Hazards of Pharmaceutical Price Controls

Article excerpt

To learn more about the views of consumers around the nation, a major pharmaceutical firm recently organized a series of focus groups to discuss drug prices, medical innovation, and the value of medicine. But the discussions rarely progressed beyond one issue. As soon as the focus group leader put up a chart showing that drug costs account for only 8 percent of America's total healthcare spending, the protests began; the members of the group would refuse to accept that the figure was so small. It had to be more--25 or even 50 percent, argued the disbelievers. Eventually, the group would disperse, having only managed to underscore the consumers' general distrust of drug companies and the widespread belief that prescriptions cost too much.

The reactions of these focus groups are consistent with national polls showing strong public agreement with efforts to control pharmaceutical prices. Even if the Clinton health plan is defeated, price controls are so politically popular they could well be incorporated into other proposals. The support for controls is widespread both in the public and the Congress.


Controlling drug prices makes sense to many Americans, who have weathered a decade of steady and hefty increases in the prices of prescriptions that far exceed the general rate of inflation. Everyone knows a story about high-cost drugs: the single mother paying $85 for antibiotics to cure her toddler's ear infection; the elderly couple being forced to choose between food and medicines; the prescription that costs half as much in Ciudad Juarez as across the border in El Paso.

Americans do not have much sympathy for drug companies, either, and Bill Clinton knows it. Pharmaceutical firms have netted huge profits in the last decade; much of the public thinks these profits have been at the expense of the poor and elderly. So the president is campaigning hard to retain price controls in his health plan, and takes every opportunity to state his case against the high costs of medicines. This is an especially potent argument to senior citizens, who buy more prescription medicines than any other group in America. In February, at a visit to a pharmacy in Greenville, Connecticut, the president let the local pharmacist do the talking for him. "People come in here and actually break down because they can't afford to buy prescriptions," said the pharmacy owner. Other customers, he said, had been forced to sell their homes and give up other necessities because of soaring drug costs.

The resentment against price hikes has been compounded by the peculiar way pharmaceuticals are treated by many insurance plans. That insurers will cover expensive visits to physicians or hospitals, but often will not cover prescriptions, is one of the great paradoxes of the current health system. Many people resent paying for drugs the same way they resent paying parking tickets or taxes. This resentment is likely to grow as new pharmaceuticals replace hospital stays and other treatments as the front-line defense for most diseases.

The solution to such problems, according to the president and other price-control supporters, is to set legal limits on the price of prescription drugs. Senator David Pryor (D-AK) and Representative Henry Waxman (D-CA), have introduced legislation in which the government would set--they use the word "negotiate"--drug prices the way it now sets utility rates.


For all their popularity, however, price controls on pharmaceuticals are one of the most dangerous elements of the Clinton health plan. The potential for controls to jeopardize drug research--and future cures--is a major threat to American health. The short-term savings are not worth the eventual harm price controls will cause.

Drug costs are not driving Americans to the poor house. In fact, Americans spend less than $250 per capita annually on medicines. …

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