Capital Commentary is the weekly current-affairs publication of CPJ, written to encourage the pursuit of public justice.

War Over Drugs

Michelle Voll


July 31, 2000

In this election year prescription drugs have taken center stage in heated political debates, fired by stories of some citizens having to choose between food and medicine. Pharmaceutical expenditures today are the fastest-growing component of healthcare costs in the United States, due both to greater drug usage and to higher prices for individual drugs.

The House and Senate each recently passed two pieces of drug-pricing legislation, though there is no guarantee they will survive negotiations in the fall. The stakes are so high for the pharmaceutical industry that it has hired one lobbyist for every two members of Congress and expended $236 million over the last three years to defeat Medicare drug-benefit and drug-pricing legislation.

The "reasonable-pricing" amendment, attached to the Fiscal 2001 appropriations bill for the Departments of Labor, Health and Human Services, and Education, requires the National Institutes of Health (NIH) to negotiate reasonable prices with drug companies using government-funded research. The "drug-import" amendment, attached to the bill for the Department of Agriculture, allows citizens, wholesalers and pharmacists traveling to other countries to bring home FDA-approved medicines sold more cheaply abroad.

Both provisions are small steps in the right direction. Of the 21 most important drugs today, 15 were developed using federally funded research. Drug companies that bought patents from the government reap huge profits from long-term monopolies on their drugs. The negotiated low-price formula is a reasonable request for a fair return on the taxpayers' investment, especially since the industry receives the highest tax breaks and is among the most profitable.

The other provision would repeal the 1988 Prescription Drug Marketing Act that gave manufacturers the sole right to import their products into the United States. With the new provision, this restriction would be lifted and Americans could have access to drugs sold in other countries for as little as half the domestic price because of foreign governments' price controls.

Opponents argue these measures will harm drug companies, which justify the high prices of medications in the United States because of the high cost of development—an average of $500 million per drug, by the industry's estimate. It is unclear, however, whether innovation would actually be stifled by these laws. That's why the International Trade Commission has launched an investigation into the matter.

Both provisions have problematic implications that call for a more comprehensive solution. NIH does not have the capacity to enter into negotiations with private industry, as the "reasonable-pricing" measure requires. Nor does it have an adequate system to track and report how many federal dollars have been invested in R & D. NIH has also failed in the past to take advantage of competitive bidding for patents.

The drug-import provision is problematic because not all citizens will have the ability to travel to other countries to get cheaper medications and those who do may end up driving up prices for those back home. Even more challenging is the issue of creating mechanisms to ensure the purchase of medications that are actually safe and not counterfeits.

The next Congress and administration should appoint a task force of private- and public-sector experts to recommend a national drug policy to better serve consumers and treat the pharmaceutical industry fairly. Unlike most developed nations, the US has no such policy and therefore no coordination and no evaluation of the costs and benefits of federal spending for drug development. It is time for an approach that gives overall direction to government-funded research, drug pricing, and access to life-saving drugs, especially for low-income and senior citizens.

—Michelle Voll, Development Director
   Center for Public Justice

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Capital Commentary is a weekly current-affairs publication of the Center for Public Justice. Published since 1996, it is written to encourage the pursuit of justice. Commentaries do not necessarily represent an official position of the Center for Public Justice but are intended to help advance discussion. Articles, with attribution, may be republished according to our publishing guidelines.”