Andrew Sullivan writes:
The next phase in the Medicare prescription drug entitlement is pretty obvious: the law will be changed soon to ensure that the federal government negotiate with drug companies for the price for the drugs. You can see the logic here at the DailyKos. Once you have laid the groundwork for a new entitlement, the full power of the state is involved. Once you have conceded the principle that all seniors should be able to get the latest drugs by borrowing other peole's money, it's weird to put any restrictions on demand - it will soon grow exponentially, and the "donut hole" will surely be removed by a future Congress. So we'll soon shift to a system of fantastically expensive free drugs of all kinds for all seniors and a crippling of the pharmaceutical industry's research and development arm. The trade-off will be complete: a collapse in research in return for free drugs for the most pampered senior generation in history. Those boomers still have clout!
We can only hope!
More seriously, fretting that centralized bargaining authority will "cripple" Big Pharma's R&D arm is silly. If Pharma ceases being in the top three most profitable industries in the country (#1 for over two decades straight!), maybe they can dial back on the advertising and administration spending, which accounts for about 250 percent more of their budget than research and development. Or maybe the government should just step in further, as they already fund 36 percent of all medical research in the country and taxpayer-funded work developed 15 of the 21 most important drugs introduced between 1965 and 1992. Another study, this one from 1990, looked at 32 drugs on the market and concluded 60 percent would've never been developed without public funds.
Yeah, socialism sure is sucky.
Moreover, the whole idea that centralized bargaining destroys the market is self-evidently silly. Ever heard of the military-industrial complex? Who do you think they're negotiating with? The American government. And you don't exactly see companies fleeing that sector. Meanwhile, Pharma sells to Canada (where prices are lower than they'll ever be here) and the VA, which pays between 50 and 80 percent less for its drugs than Medicare. And unless you think Pharma is in the charity business (or don't understand capitalism), they're operating in those markets at some profit, otherwise they would simply sell to America and let Canadians and veterans alike perish till they increased their compensation. The worst that'll happen is Americans will stop subsidizing a massive discount for Canadians, Brits, Germans, and all the rest.
And by the way, in case you're wondering how some of that R&D works, take a look at the cancer drug Taxol. Discovered by the NIH and licensed to Bristol-Meyers-Squibb, Taxol is sold for $20,000, costs $1,000 to produce, and the NIH gets .5 percent of the royalties. Some deal us taxpayers are getting.
