Marketplace, October 29, 2003
Prescription drugs are the largest single health-care expense for most Americans, especially seniors. And drug prices are rising at a whopping 17 percent a year, more than four times faster than inflation. Pharmaceutical prices are higher in the United States than in any other country in the world. That's why increasing numbers of Americans are filling their prescriptions in Canada.
It's also why politicians of all stripes are eager to put their names on legislation providing prescription drug benefits. Whatever emerges from this Congress is likely to be a complex and pricy sheme that will cost American taxpayers upwards of $400 billion over the next decade.Drug companies say all this money is necessary because research and developmenton new drugs is hugely expensive. Bringing a new drug to market costs between $500 and $800 million. And we all benefit from what these new drugs can do.
But pharmaceutical companies don't own up to the fact that you and I are already paying twice for new drugs. Not only do we pay high and rapidly-escalating purchase prices for them. We also pay through our taxes. You see, a portion of federal tax revenues goes to support drug research.
For example, eight of the ten most popular drugs produced by one of America's largest pharmaceutical companies were developed at the National Institutes of Health, which is a huge taxpayer-funded research complex. Most of today's anti-cancer drugs also have come courtesy of the National Institutes of Health.
Drug companies do research and development, of course. But they devote only 12 and a half percent of their incomes to it, on average. They spend more than twice that on advertising and marketing. Much of the rest is profit. And drug companiesare very, very profitable. During the recent downturn, the nation's top ten pharmaceutical companies reported a 33 percent increase in profits.
I've got a proposal that won't add a penny to the federal budget, will hold down a lot of drug prices, and won't harm research and development on new drugs. Here's the deal: Any drug company that wants its research subsidized by American taxpayers has to limit the price of its new drugs to the direct cost of producing them -- that is, materials, factory production, and distribution-- plus a fair return of, say, 15 percent.
No drug company has to take this deal, of course, because it doesn't have to turn to government to finance its research. But if it wants you and me to pay for its research with our tax dollars, it can't expect us to subsidize it once again by paying through the nose for its new drugs. Got it? One bite at the apple. Either tax-payer supported research or consumer-supported research.
It's their choice. But it's our wallets.
