A Brilliant Plan For Pharmaceutical Progress – The Punch Line

DrRich | March 18th, 2011 - 10:40 am


In his prior post, DrRich offered for your consideration a Brilliant Proposal that would assure at least some continued advances in pharmaceutical therapy, while at the same time providing the drug price controls which we all very much want, and which many (mainly those of the Progressive persuasion, who assert that the essentially evil nature of drug companies justifies any action we care to take against them) insist we deserve.

For those readers who have seen fit to e-mail and Tweet DrRich to complain that his Brilliant Proposal is not nearly punitive enough toward the drug companies, DrRich reminds you that, while cheerfully acknowledging at the very outset that drug companies are indeed evil, his Proposal attempts to balance that unchallenged fact against the (apparently lamentable) truth that, every now and again, one of these companies will inadvertently stumble upon a product that actually benefits people in a very substantial way. His plan proposes a method by which the price controls we all deserve can be established, while still allowing for occasional spurts of pharmaceutical progress.

DrRich’s proposal can be summarized as follows. Each American would formally elect to participate or not in a voluntary plan of price controls. Those who elected to participate would be entitled to receive any legal prescription drug at low prices set by a sympathetic government board, as long as the drug had been on the market for some fixed amount of time. (DrRich arbitrarily suggested five years, but that number could just as easily be set at 10 years, or any other value.) Those who choose not to participate in the price control plan would have to pay whatever the drug companies wished to charge them for all their prescription drugs – but they would be eligible to receive new prescription drugs immediately upon FDA approval (that is, the five- or 10-year waiting period would not apply to them). Finally, individuals would be able to change their status (from participant to non-participant, and vice-versa) only every two years.

Just as is the case with the more traditional drug price controls which many Americans are calling for, DrRich’s plan would achieve low drug prices (for anyone who elected to participate). But DrRich’s plan offers, in addition and in distinction, a mechanism by which pharmaceutical progress could continue, albeit at a much slower pace than we see today. That is, it allows for a population of Americans who are willing to pay full price for all their drugs in exchange for earlier access to new products. Thanks to these individuals, drug companies will be induced to continue spending something on drug research and development.

As a result, even those who choose to participate in DrRich’s price control plan would be able to count on a pipeline of new drugs, which would become available to them at very low prices after the mandated five or 10-year delay. This is a very useful feature that would not be available under the more traditional price control plans being advocated by most Progressives, such as the price controls being enforced in Canada today.

(Canadians, of course, today rely on a steady stream of new, relatively cheap drugs which are made possible only thanks to their Southern neighbors’ “willingness” to pay full price. DrRich’s plan, fundamentally, mimics the relationship between the US and Canada regarding drug prices. Those who participate in DrRich’s plan are the “Canadians,” and those who do not participate are the “Americans.” So in truth, DrRich is not actually inventing anything novel.)

So: All we need is to launch a grassroots movement to convince our legislators that this proposal offers all the benefits of the drug price controls which many Americans are insisting upon, without its major drawback (i.e., a complete stifling of pharmaceutical progress). Then, having done that, we will simply need to set up the sundry federal bureaucracies which will establish and administer the participation status of every American, and a government board that will set the official prices of all prescription drugs, and a few new enforcement agencies here and there, and of course some sort of administrative judge that can hand out exemptions to unions and other indispensable entities which would really like to have some new drug they’re not legally supposed to have. But with the kind of streamlining in federal processes and procedures promised to us under Obamacare, we should be able to implement DrRich’s plan pretty quickly and efficiently.

The Punch Line

There is, of course, a punch line.

Now that you have had ample time to digest the favorable implications of DrRich’s proposal, and can plainly see the wisdom behind it, you will be delighted to know that you don’t actually have to wait for federal legislation and the establishment of a vast new federal bureaucracies in order to participate. You can participate today, right now, with nobody’s acquiescence but your own.

Here’s how. Simply declare to yourself that DrRich’s system is already in place, and that you are a participant, and that the only drugs available to you are the ones that have already been on the market five or 10 years or longer. (You can choose your own personal waiting period.) When you see your doctor, insist – demand – that he/she prescribe only older drugs. The price of most of these drugs will be set not by a government panel, but by WalMart (which for many common generic drugs has set a co-pay of $4). By declaring yourself as boycotting the brand new drugs that are being sold (unfairly, of course) at the highest premium, your personal drug costs will be remarkably reduced – just as if federal price controls were really in place.

Furthermore, since currently there really aren’t any federally-mandated price controls, drug companies are not yet constrained from investing in the development of new drugs. As long as this situation continues, there will be a reasonably steady stream of new drugs exiting that magic five- or 10-year boycott period you have set for yourself, and thus becoming available to you under your personal, voluntary price control plan.

And best of all, if you were suddenly to develop a medical condition that clearly calls for one of the brand new drugs, one that wouldn’t be available to you, either temporarily under DrRich’s Brilliant Proposal, or ever under a government-mandated price control system (because under the government plan the drug never would have been developed in the first place), you won’t need to wait five or 10 years (or forever) to get that drug. Since you are really only “pretending” there are drug price controls, the moment you decide that a system of price controls is no longer accruing to your own personal benefit, you can simply ask your doctor to write you a prescription.

Those clamoring for government price controls on drugs can have them today – this very afternoon. They can experience every aspect of price controls (both low prices and the unavailability of new drugs) in a way that places them in no worse a position (indeed, in a far better position) than if government price controls were actually in place, and without reducing the options for everyone else.

Indeed, considering the above, the only way it would make sense to continue demanding mandatory price controls would be if something other than reducing drug prices were the chief motivating aim.

DrRich leaves it as an exercise for his regular readers to determine what that motivating aim could possibly be.

2 Responses to “A Brilliant Plan For Pharmaceutical Progress – The Punch Line”

  1. I support your article. People are free right now to adjust their drug expenses in a more flexible way than would be possible under federal regulation and interference. So, why are people upset about the current situation, and why do they blame the free market of choice?

    •   Insurance is not flexible.

    Health insurance is regulated, manipulated, and distorted in every state. Lobbyists at the state level arrange for their treatments to be covered by insurance, such as accupuncture and health clubs. Insurance plans differ in total financial coverage, but don’t offer ways for the consumer to benefit from choosing an older, cheaper drug. So, everyone picks the new, expensive drug, and the state-standardized insurance plans evolve to universally cover those and to cost more.

    •   Insurance is not personal.

    Most health insurance is bought by employers for their employees. This is due to tax benefits originally granted to get around wage and price controls during World War II, 65 years ago. Untangle the tax mess, and make all health insurance and useful medical care tax deductible. Then individuals could buy insurance for their long-term benefit, and insurance companies would create a variety of plans to meet individual preferences.

    •   Medicines are too safe and too expensive.

    Drug development is burdened by amazingly bureaucratic rules and huge expenses. The FDA is applying a ridiculous standard of testing and safety. Delays in introducing new drugs have arguably caused more death than the occasional cases where a bad drug side effect has appeared. And, this is in a market where almost any uncontrolled herbal remedy is available to poison the public.

    Drug companies, competition, and doctors would quickly decide what level of safety and testing is required in each case. Tell people that the government is not magically protecting them, and they would question all drugs and demand the safety they deem appropriate.

    Ironically, without the FDA, snake oil drugs could not claim that they have been suppressed by an establishment that wants expensive drugs and is suppressing inexpensive, “natural” remedies.

    •   Cost Shifting is Raising Sticker Prices.

    The government is saving money on its lavish medical promises by underpaying for services delivered to Medicare and Medicaid patients. Doctors and hospitals react by raising prices in general, and collecting most of their reimbursement from private insurance patients. Private patients look at the prices and conclude that their doctor and hospital are thieves taking advantage of their misery.

    The government should be giving vouchers, not specifying reimbursements. The overpromising by politicians will not end well under any plan.

    These are the problems in our current health care. They are all the result of government control and intervention. Removing that intervention is the way to fix the system. I am not holding my breath.

    The free market in healthcare is breaking, and the government is breaking it. Our policy makers have already designed a system of price controls that doesn’t work. Their solution is to cover up this failure by blaming “the market”. The “market” is short for the freedom of people to produce and cooperate among themselves.

    That freedom is what the government wants to take away, in favor of higher hidden taxes and directed rationing. Our leaders have been buying votes with lavish promises of what the government will deliver. Their plan is to put us all in one boat, then make us pay for their promises to prevent the boat from sinking.

    Obamacare Bails Out Medicare.

  2. Ben Rush, MD says:

    This plan works beautifully, unless you have either cancer or one of those NORD diseases. Then what?

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