TCS Daily

The Post on Drugs

By James Pinkerton - February 23, 2004 12:00 AM

Stop the presses. Water is flowing uphill, clocks are running backward, men are biting dogs -- and The Washington Post has just written a fierce editorial against heavy-handed government. Last week, the Paper of Powertown published an editorial entitled "Pricing Drugs."

As I started reading, I thought to myself, "Uh oh, here comes the Post offering up a plan for setting drug prices -- a commission, maybe of Democratic and Republican worthies and experts, who would sit around some marbled office building, determining the Just Price for given pharmaceuticals.

That was, after all, the way that Uncle Sam approached energy matters back in the 1970s, when everybody here in DC seemed to believe that experts, not the market, should be in charge of pricing energy. And so the US suffered through a decade of both shortages and high prices. That's the government for you; that's what you get when the people who gave us the Postal Service are empowered to expand their turf.

But as I started reading, I started feeling better. The Post edit was mostly a critique of demagogic efforts, mostly coming from Capitol Hill, to rewrite the new Medicare prescription drug program in ways that would harm the pharmaceutical industry -- and, more to the point, pharmaceuticals and the people who rely on them. In fact, the edit read like a leader from The Economist -- intellectually tough-minded, economically "dry," well-written, persuasive. To be sure, the Post's editorials are not as liberal as The New York Times', but this edit was almost Wall Street Journal-like in its musicality to a free-marketeer's ears.

"Pricing Drugs" touched on three major topics: reimportation, price controls, and, finally, what the paper thought ought to be done for the long-term well-being of Americans.

The Post was probably correct when it said that the reimportation of American-made drugs back from Canada "cannot be maintained indefinitely." For one thing, under competitive pressure from Canadian reimports, American firms are beginning to cut supplies to those whose business is to drain drugs from actual Canadian patients and arbitrage them back into the U.S. Let's face it, markets work.

But more to the point, reimportation is a public-health disaster waiting to happen. On January 27, the Food and Drug Administration (FDA) and the US Customs and Border Protection Agency (CBP) announced that a second series of import examinations found an astounding number of dubious and dangerous pharmaceuticals slipping into the country. Over a two-month period, operating in six American cities--Buffalo, Chicago, Cincinnati, Dallas, Memphis, Seattle -- The FDA/CBP examined 1982 parcels that appeared to contain pharmaceuticals. Of these, 1728 contained unapproved drugs, including such dicey items as drugs that required special storage
conditions, special physician supervision -- even drugs that had been legally recalled in the US.

And the FDA's own magazine has gone to great lengths to warn on this topic, noting, for example, that drugs imported from "Canada" might not be from Canada at all -- but rather from chancier countries such as China and India. And the drugs could be contaminated, counterfeited, superannuated -- or not even drugs at all, but rather just sugar, lactose, or some other filler. As the FDA's Joe McCallion, a consumer safety inspector at the FDA, said, "If you buy drugs that come from outside the US, the FDA doesn't know what you're getting, which means that safety can't be assured."

The irony of the moment, of course, is that many on the political Left are hailing reimportation -- which is the wildest and woolliest form of unbridled "the public be damned"-kind of capitalism imaginable -- as a price-panacea. But such devotion to markets will change, to be sure, as soon as people start dying from dud drugs; that's when the Left will shift from reimportation to the policy prescription that it really likes, which is price controls.

And it was this idea of price controls that the Post attacked in its editorial, big time. The edit observed that the idea of "doing something" about Pharma prices was picking up steam, warning, "The price-control movement that may take off -- and succeed -- at any time." Yet, the edit
declared, "Governments are notoriously bad at setting prices." The piece noted that Pharma spends $30 billion a year on research and development; the point was plain enough: squeeze down on prices, squeeze down on R&D, squeeze down on people's health.

Instead, the Post put its focus on two key factors which would be important to any true free-marketeer -- regulatory relief, and the federal government's better aiding in the distribution of information to consumers. As the paper observed, "Markets don't work well without correct information." Amen to that. But it was nice to see the Post operating on the un-Washington assumption that consumers could think for themselves. Moreover, arguing that an informed public is the best guarantor of both quality and affordability, the Post called for restoration of full funding for the Agency for Healthcare Research and Quality, a small sub-unit of the Department of Health and Human Services that serves as a clearinghouse for health care information.

But alas, not everyone in Washington reads, or is guided by, the WaPo edit page. Democrats in Congress, led by House Minority Leader Nancy Pelosi, are now calling upon the federal government to "negotiate" lower prices. But in the words of Gail Wilensky, a former director of the Medicare program, "Government doesn't negotiate prices -- it sets them." That is, the government is big and powerful enough to have its way.

Currently, many in Washington -- both on the hard Left and on the populist Right -- are looking for ways to radically reduce the government's health care bill. Yet these corporation-scourging, would-be price controllers seem more focused on fiscal matters than on health matters. Which, upon reflection, is passing strange, because the purpose of health care, after all, is health. Saving money without saving the patient is a false economy.

And so, for example, many legislators wish to apply the Veterans Administration's heath care purchasing policies to the entire Medicare system. If that were to happen, the federal government might win the battle to lower its health outlays. But it's increasingly apparent that under such cost-scrimping-and-scrunching regime, health outcomes, too, would be lowered.

Happily, The Washington Post has weighed in with a pro-science, pro-progress, pro-health agenda for 2004 and beyond. Now the question is whether or not the Post's readers in Powertown will be persuaded by a strong does of common sense -- or be seduced by demagogic, but counterproductive, placebos.


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