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health care. Massive waiting lists, care delayed

Political Solutions That

and denied, disincentives for research and

Cause More Problems

development, and limited access to new tech-

nologies and treatments are standard.107

Alas, since new, better, and more expen-

Problems are rife even in the best of single-

sive medicines are considered to be a prob-

payer health systems, such as the one in

Canada, that rely on price controls.108 They

lem, American politicians have come up with

a host of counterproductive "solutions." The

include long lines; minimal access to diagnos-

most common is price controls, though

tic technologies; patients fleeing abroad, par-

other favorites include stripping away patent

ticularly to America, to jump local queues;

protection, limiting advertising, and expand-

provinces contracting out treatment to U.S.

ing taxpayer-financed subsidies.

hospitals; pressure to sharply boost spending;

and even proposals to move closer to the

American system.109  Indeed, when the

Price Controls

Price controls can be direct or indirect.

province of Ontario closed its hospitals

Some proposals would link U.S. prices to for-

around Christmas 1993 because it was out of

eign levels; others would limit the costs of

money, Theodore Freedman, president of

Reimportation

drugs purchased as part of federal or state pro-

Toronto's Mount Sinai, which was shuttered

policies for drug

grams. Some creative state legislators would

for two weeks, put it bluntly: "This is not

about health care. This is about the deficit."110

bring the non-poor under Medicaid, which

sales would

imposes price controls on pharmaceuticals.

A government commission now wants to

effectively apply

Most countries other than the United

increase the national government's subsidies

foreign price

by 50 percent.111

States regulate the prices of drugs, whether

directly through price controls, indirectly

Price controls have also sharply reduced

controls on the

access to needed drugs in Canada.112 Of 400

through limits on reimbursements under

American market.

social insurance programs, or indirectly

drugs considered for reimbursement by the

through profit controls imposed on drug

Canadian province of Ontario between 1994

companies.101 Any form of price restriction

and 1998, only 24 were approved. Provinces

tends to be inherently arbitrary and generate a

waited months or years before adding newer

medicines to their formularies.113 Unfor-

host of unintended consequences. Whatever

the official criteria of the price control regime,

tunately, explains Dr. McArthur, in the

warns John Calfee of the American Enterprise

province of British Columbia more than a

Institute, "decisions would be dominated by

quarter of all doctors report that they have

political forces, including managed care orga-

had to admit patients to the emergency room

nizations, domestic versus foreign manufac-

or the hospital because of government-man-

turers, patient groups, insurance firms,

dated substitutions of prescription drugs to

employee benefit managers, labor unions, and

older and less expensive medicine; 6 of 10 have

other advocacy groups."102

seen their patients' condition worsen or symp-

The general case against price controls is

toms accelerate due to mandated substitution

clear.103 Their experience running back to

of drugs.114

ancient times is extremely poor.104 They

Europe's experience with price controls on

inflate demand, depress supply, create short-

pharmaceuticals is similar. Europeans also

ages, shift activity to unregulated sectors, and

have far less access to prescription drugs, par-

ticularly newer, more effective products.115

encourage wasteful avoidance and evasion

activity.105 They also inevitably drift toward

The research group Europe Economics has

more complicated controls, entrench vested

found that patients often wait years for access

to even life-saving new medicines.116 Incred-

interests, take on a life of their own, and

become extremely difficult to dismantle.106

ibly, the more useful the product and the more

Price controls have the same impact on

people to be helped, the smaller likelihood

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