Senioritis

Drug price controls just a few years away

There are two parties in Congress, runs the old joke: the Stupid Party and the Evil Party. When the Stupid Party in the ascendancy it passes stupid laws, and when the Evil Party is on top, it passes evil laws. But sometimes they get together and pass law that are both stupid and evil. This is called bipartisanship.

In just such spirit of bipartisanhip, Republicans and Democrats have gotten together in the Senate to push for a Medicare prescription drug coverage benefit for seniors.

It appears that both the House of Representatives is supporting a similar measure and the Bush Administration has blessed this effort. At a conference sponsored by the New America Foundation to discuss mandatory universal health insurance proposals this morning on Capitol Hill, Democratic Senator John Breaux from Louisiana confidently predicted that some version of the bipartisan Medicare prescription benefit plan will pass within a month.

The current version of the Senate plan would cost seniors $35 in monthly premiums and would include a $250 deductible. After the deductible, the government would pay half the cost of outpatient drugs up to a limit of $3,450. However, the Senators are already talking about raising that limit. The cost to taxpayers is supposed to be $400 billion over the next ten years. Given the speed with which this plan is flying through Congress, one might think that millions of seniors are keeling over from lack of drugs. But is there really a crisis? It turns out the average senior citizen spends just about $650 a year on prescription drugs. Also, fewer than 10 percent of seniors spend more than $2,000 a year and seventy-five percent already have some kind of prescription drug coverage. In fact, most seniors spend more on entertainment than they do on pharmaceuticals.

Nevertheless, the American Association of Retired Persons bought double full-page ads in the Washington Post demanding that this new entitlement program be passed. Setting aside the question of whether or not taxpayers can afford this program, its effects on future pharmaceutical research will likely be disastrous. Why? Because, as Paul Heldman an analyst for the Schwab Washington Research Group told The New York Times, "Historically, Medicare starts out paying providers enough so that it is attractive for them to do business." He noted that then Medicare payments start to drop beneath the real cost of providing services. "There's no reason for it to be any different with any drug benefit." Congress has been stiffing doctors and hospitals with Medicare payments that don't cover their costs for years now. Why will it be any different for drugs?

Once the system is in place, Medicare will begin "saving" money by dictating the prices it will pay for the drugs it buys. This will squeeze pharmaceutical company profits; this will force companies to cut their research budgets. Lower research budgets mean fewer new medicines and longer rollout times, ultimately meaning that more seniors (and others) will die because new, safe, effective drugs that would have otherwise been available will not be developed.

See what I mean by bipartisanship?