Demonizing Drugmakers: The Political Assault on the Pharmaceutical Industry

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Few sectors of the economy have providedmore benefits to consumers than the pharmaceuticalindustry. Drugmakers have been vilified bypatients and politicians alike, however, because ofwhat they see as unreasonably high drug costs.

Yet medicine is not the most important componentof the recent rise in health care expenses.Moreover, the primary reason for current increasesin total drug costs is that more and more peopleare using newer medicines--which means thatconsumer benefits are rising even faster.

Simplistic comparisons between drug costs inthe United States and those in other countries havelittle value. Economic wealth, exchange rates, productliability rules, price controls, and other factors allcontribute to the price of drugs.

More important, prices for U.S. pharmaceuticalsare not excessive relative to the benefits they offer.Drugs have contributed to the sharp reduction inmortality rates from many diseases, including AIDS(Acquired Immune Deficiency Syndrome). Pharmaceuticalsalso reduce the cost of alternative treatments.Thus, restricting access to the newest and bestdrugs can be economically counterproductive.

Unfortunately, the only way to develop newdrugs is to invest heavily in research and development.The $30 billion spent annually by U.S. drugmakersdwarfs the budget of the NationalInstitutes of Health and investments by foreigndrug companies. Profits of U.S. firms tend to behigh, but not uniformly so, and they create a "virtuouscycle" that encourages more R&D to createnew medicine.

Yet industry critics propose everything fromsocialized medicine to price controls and limits onpatents. Such measures would, however, reduceincentives to create new medicines. It is true thatsome people, especially poor people in less-developedcountries, lack sufficient access to pharmaceuticals.Private charity at home and abroadshould make pharmaceuticals more available topeople who are most in need, and Washingtonshould include a drug benefit as part of overallMedicare reform. In the meantime, states shouldhelp needy seniors through limited pharmaceuticalaccess programs.

Policymakers must avoid taking steps thatwould, intentionally or not, wreck a world-leadingindustry and deny people access to life-savingmedicines.

Doug Bandow

Doug Bandow is a senior fellow at the Cato Institute.