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by Luke Eric Peterson
Forget about the liquor cabinet. It might be time to slap a lock on the medicine cabinet.
Recently the U.S. Congress voted to approve a subsidy program that will help its senior citizens cope with rising prescription drug bills. But Congress refused to go down the road traveled by most other Western governments: using price caps to rein in spiraling drug costs.
The bill, which President George Bush will sign into law Monday, forbids the government from using its purchasing power to negotiate better prices with the pharmaceutical industry.
It also requires a study to be undertaken of price controls used in other countries that may hinder the profitability of U.S.-based pharmaceutical companies. Having foresworn the use of price controls in their own market, a number of American politicians now hope to dismantle those in other countries.
Dennis Hastert, the Republican Speaker of the House of Representatives, has lobbied the White House to use international trade rules to challenge Canada's price controls, which are administered by our Patented Medicine Prices Review Board. It's something that the pharmaceutical industry has been pushing for years.
But, it's not clear that the U.S. government has much of a legal case.
Professor Frederick Abbott, an expert on international patent law at Florida State University, says that most trade lawyers agree that World Trade Organization rules do not give the U.S. much leverage to challenge price controls.
"There truly is nothing in the TRIPs (Trade-Related Intellectual Property) agreement that permits one country to bring a claim against another country for practices of that nature," Abbott says. This may explain why the U.S. appears keen to draft new trade rules that will prohibit governments from lowering pharmaceutical prices.
Australia, which has some of the lowest drug prices of any developed country -- less than half those of the U.S. -- is currently in the Bush administration's crosshairs.
The U.S.' top trade official has insisted Australia's Prescription Benefits Scheme (PBS) -- which also sets caps on the prices charged for new drugs -- operates as a "protection system."
And Bush has warned Australian Prime Minister John Howard that U.S. consumers feel they get a "raw deal" because they shoulder more of the pharmaceutical industry's global research costs, through high U.S. drug prices.
It's a view echoed even by liberal U.S. politicians. Massachusetts Senator Ted Kennedy has warned, "There is no reason that the U.S. ought to subsidize the rest of the world on pricing."
This is the standard industry refrain: that research and development ultimately suffers when countries pressure drug firms to lower prices.
But a 2002 report by the non-profit National Institute for Health Care Management has shown that the wildly profitable pharmaceutical industry has been producing far more "me too" drugs -- rather than truly innovative medicines -- in recent years.
It's been far easier to make minor tweaks to existing drugs -- transforming Claritin into "new and improved" Clarinex -- than to direct more money towards genuine innovation.
Indeed, the U.S.-based industry has ramped up spending on drug marketing -- particularly of lucrative lifestyle drugs -- much faster than spending on research. Over the last decade, the Wall Street Journal found that U.S. drug firms had tripled the number of sales reps who visit doctors' offices in order to drum up greater drug sales.
One harried physician told the Journal his office sees a dozen such reps in a given day. His own prescription was admirably straightforward: "(If drug makers) would reduce their sales forces, give me the same number of samples and lower prices of their medicines, I would be very happy."
One hopes the good doctor doesn't hold his breath; otherwise he'll succumb to self-asphyxiation. As Congress has now made clear: U.S. prices are not coming down. And the next political battle is an international one -- to tear down price controls in other countries.
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