Price Controls are Bad Medicine

"Expert after expert confirms the fact that government price controls on prescription drugs and new, innovative medicines do not go together. If we want to continue the unprecedented level of drug discovery that is helping so many patients, we have to reject price controls," Holmer said in a statement released at the American Legislative Exchange Council (ALEC) workshop on "The Impact of Government Mandated Price Controls on U.S. Health Care."

Holmer cited a new study released April 29 by the Boston Consulting Group (BCG) on the impact of government interventions in the pharmaceutical market as further evidence that price controls are not the answer. BCG "found that price controls and other forms of market intervention can actually harm patients. They do this by reducing the rate of adoption of some important new therapies. This effect is particularly important in those diseases such as high cholesterol and depression," according to one of the authors.

The issue of imposing new government price controls is part of a debate about how to help seniors better afford medicines. One federal bill, proposed by Rep. Tom Allen of Maine (D-ME) and Sen. Ted Kennedy (D-MA), would impose price controls on 40 percent of the pharmaceutical market Ð and on 100 percent of virtually senior-only drugs for diseases like A lzheimerÕs and ParkinsonÕs. The bill would give mandated discounts to drug stores, but would not require the discounts to be given to seniors.

"The Allen bill sounds like an easy solution, but in reality itÕs not the right answer," Holmer said. "Seniors need drug coverage."

The pharmaceutical industry supports expanding prescription drug coverage, but it should be done through a modernized Medicare system that allows private sector health plans to offer seniors health care coverage that relies on good choices for seniors and competition in the marketplace. This is the best way to provide high quality care to our seniors, while at the same time control overall health care costs, Holmer explained.

Holmer pointed to experiences overseas as yet another reason to reject price controls. In a May 1994 study, the General Accounting Office found that pharmaceutical price/profit controls imposed by France, Germany, Sweden, and the U.K. have not worked and have hurt innovation. The same conclusion was expressed by 565 economists in an open letter to President Clinton on January 13, 1994, during consideration of his health-care reform proposal: "In countries that have imposed these types of [price] regulations, patients face delays of months and years for surgery, government bureaucrats decide treatment options instead of doctors and patients, and innovations in medical techniques and pharmaceuticals are drastically reduced."

Holmer said the ALEC workshop offered a timely opportunity to consider the flaws of government-mandated price control legislation on prescription drugs.

The Pharmaceutical Research and Manufacturers of America (PhRMA) represents the countryÕs leading research-based pharmaceutical and biotechnology companies, which are devoted to inventing medicines that allow patients to lead longer, happier, healthier and more productive lives. Investing $24 billion annually in discovering and developing new medicines, PhRMA companies are leading the way in the search for cures.