September 28, 2015
It must be nice to have a trade group that is so powerful that it can get newspapers like the Washington Post to parrot your line even when it is not true. The folks at Pharma will presumably be toasting a Wonkblog piece that told readers:
“The drug industry trade group keeps reminding the public that drug spending has been holding steady for years, at about 10 percent of the total health-care pie. They point to that as evidence that drugs are a special area of the health care industry, unlike almost any other sector, where competition occurs and prices actually go down over time.”
That’s great, we’re supposed to debate why drug prices have been holding steady as a share of total health care spending. That will be a classic Washington Post debate, since drug prices have actually been rising considerably faster than overall health care spending. As noted last week:
“According to the National Income and Product Accounts (Table 2.4.5U) prescription drug spending increased at average annual rate of 6.3 percent over the years from 2004 to 2014, rising from $203.6 billion in 2004 to $374.7 billion in 2014 (Line 122). By contrast, spending on health care services rose at annual rate of 4.7 percent over this period, going from $1240.1 billion in 2004 to $1954.0 billion in 2014 (Line 168).”
Furthermore, over the last five years the gap in growth rates is even larger, with prescription drug spending rising at a 6.2 percent annual rate and spending on health care services rising at just a 3.7 percent annual rate.
So we can follow the Washington Post and debate why 3.7 percent is the same as 6.2 percent or we could talk about developing a more efficient and less corrupt method of financing drug research. We don’t need to hand out government granted patent monopolies to finance research, we can pay for the research upfront.
We already do that now to the tune of $30 billion a year through the National Institutes of Health. We can double or triple this funding and direct it towards the development and testing of drugs. (Note, I am proposing paying scientists. Many people apparently have a hard time understanding why people would work for pay rather than patent protection. Almost all of us do.) This would allow new drugs to be sold at the same price as generic aspirin. Then we wouldn’t have to spend endless hours debating who should be able to get them and how much they are worth.
Patent monopolies lead to the same sort of corruption that economic thoery predicts when the government artifically props up the price above its free market level. Drug companies mislead the public about the safety and effeciveness of their drugs, they lobby politicians to make their patent monopolies longer and stronger, and they pay off generic drug companies to stay out of their market.
It would be great if we could have a serious debate on a better method for financing drug research, but the Washington Post, which gets lots of advertising dollars from the drug industry, would rather have us debate why drug spending is not rising as a share of health care spending.
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