November 27, 2003

Drug Price Reductions a Republican Would Love

Cointelpro published what I think is a low blow about the Republican party. Entitled Why I Could Never be a Republican, he asserts that Republicans (in this case Andrew Sullivan) believe that "any action taken to lower the insane costs of drugs will kill innovation". This is just factually not true. Off the top of my head I can think of two conservative positions of long standing that would have the effect of reducing drug expenses and would have not only some but majority Republican support.

1. Actions to reduce 1st world drug R&D free riding.
2. Actions to increase the time that a medicine is available for use under patent protection without lengthening patent protection.

Since drug R&D is the majority of the cost to introduce a new pharmaceutical the developer has radically different (and higher) costs than any competing producer once the temporary patent monopoly expires. To survive that, the R&D costs for that drug (and that drug's share of preceding dead end research) have to be recovered before the patent expires and new generic competitors start producing the same drug, otherwise you're going to lose money as your sales dry up as you won't be able to cut prices sufficiently to maintain some share in the market.

Some countries simply are too poor to be able to pay much more than the generic price. In such countries, it makes sense to enter the market, price the drug at what the market will bear, and make a small profit rather than charge one price worldwide and get almost no sales in that particular country. This logic holds as long as people can't just take delivery in that country and transship them to a rich country, pocketing the price difference. Arbitrage has to be too expensive to be worth it.

The problem is that rich countries that could afford to pay a higher price have passed laws controlling drug prices to some government derived formula that is below market price. They depend on the drug companies making the same calculations for them as for a poor nation and so far things have worked out pretty well, for them. In passing these laws, they have reduced the pool of 1st world patients who pay for the R&D, thus forcing the remaining consumers to pay not only their share but the share of their free rider cousins in other 1st world countries. The problem has gotten so bad that no other major 1st world nation is paying their full R&D share but the US. Republicans would have no problem in legislation that addressed this and encouraged other countries to re-establish a free market in pharmaceutical prices.

The second point is a familiar conservative complaint. The FDA is too bureaucratic, too slow, too cautious and it drug approval delays cost lives. Legislation to improve FDA approval efficiency would reduce drug prices and would have overwhelming Republican support.

So maybe Cointelpro might end up a Republican after all?

Posted by TMLutas at November 27, 2003 06:46 PM