and the
Citizens Economic Research Foundation


Barbara's Column
August 2003 #3

There's a pill for everything
except the stress of paying for them
by Barbara Anderson

The Salem News
Friday, August 15, 2003

So I had this pain in my right heel, and after a week of limping about, I checked with my doctor and he gave me a prescription for Vioxx.

First, though, he asked if my health insurance covered drugs, which it usually does, minus the deductible. I discovered why he inquired when the pharmacist told me the prescription would cost $103 for a month's supply unless the doctor first explained to the insurance company why something cheaper wouldn't do instead.

I bought two Vioxx pills for $6.80 and called the doctor, who agreed we could try Advil as long as I take it with food. Vioxx works without upsetting one's stomach, but for $103 I don't mind eating.

Still, if I find that Vioxx works better than Advil, I am happy to pay the $103, since walking is more important to me than something else I could buy with the money.

I know it takes a lot of money to develop new and better drugs, and I'm willing to pay my share for progress against pain and disability. In its simplest form, the cost of drugs could be a marketplace issue: No one is entitled to cheap medication, and we must expect to pay for the research and development of new drugs that can save our lives or quality of life.

But the cost of drugs is not a simple marketplace issue. As usual, some government somewhere is screwing things up.

First, there's Canada. The socialized medicine country has simply decided it will put a cap on the cost of prescription drugs.

If Canada and the Europeans, who also have price controls, were the only countries in the world, the marketplace would kick in. Drug companies, unable to recoup the cost of research and development, would cut back on creating new and better drugs. Patients would suffer more, and probably die sooner, saving the socialized medicine system even more money.

But fortunately for sick Canadians, Uncle Sucker Sam is sitting south of their border.

In order to recoup their Canadian losses, drug companies just charge sick Americans more than they would have to charge if both countries were paying their share. To make sure this plan works, the companies spend even more money to advertise their new drugs, knowing that Americans will succumb to TV commercials and ask our doctors for the little purple pill or whatever helps us walk up cliffs with strangers, play painlessly with our grandchildren and no longer suffer the heartbreak of "social anxiety."

Now, the U.S. government could also legislate price controls. But if it does, then who is going to pay for the research on new drugs: Mexicans? I suspect that, literally, the big bucks stop here. So our government has sense enough not to cap the cost of prescription drugs.

But this does not mean the government - and the drug companies that lobby it - doesn't have a plan!

The plan is to prohibit Americans from buying their drugs more cheaply from Canadian pharmacies. And like most plans that ignore the marketplace, it isn't working.

Not only are individual Americans buying drugs from Canada by mail and online, but entrepreneurs have formed companies to facilitate these purchases, and even some communities like Springfield here in Massachusetts are going to Canada for their employees' medications.

While the U.S and Bay State governments warn about the dangers of drugs that are not being regulated by our drug agencies, some of our legislators are filing bills to help people take this risk. It's becoming a big Canadian cheap-for-all!

To make it even more interesting, the federal government is considering legislation that will add prescription drug coverage to Medicare.

Certainly when a third party pays for health care or drugs, the incentive to control costs is lowered. Consumers who are covered by insurance or the government don't complain about price until insurance companies limit coverage. But the insurance companies pass on much of their cost to the employers who pay the premiums; government adds to the problem by mandating additional coverage to please voters/consumers; and ordinary businesses, which don't have a lot of clout with anyone, get a premium break by laying off some of their employees. This last, however, is not a good solution for the employees.

Washington politicians are trying to craft a Medicare prescription drug bill that won't invite abuse from either consumers or drug companies. Whatever protections they include in the final version will eventually be eroded by the political power of senior citizen groups, which will grow in influence as members of the baby boom generation climb aboard.

And once the drug companies know that working taxpayers will be forced to pay whatever senior citizens demand, American drug costs will soar like never before. When that happens, the younger American with limited insurance coverage and a giant tax burden had better learn how to say "Vioxx" in Canadian.

Barbara Anderson is executive director of Citizens for Limited Taxation. Her syndicated columns appear weekly in the Salem News and the Lowell Sun; bi-weekly in the Tinytown Gazette; and occasionally in other newspapers.

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