When Governments Choose To Pay For Medicine, They Also Choose What Medicine To Not Pay For


According to the Wall Street Journal, a number of European countries are planning to cut back on prescription drug spending in order to help patch their budgets. Predictably, that means that some of the latest, most expensive drugs won't be available to some folks:

Greece has enacted some of the steepest cuts, slashing what it will pay by about 25% and drawing the ire of some drug makers. Over the weekend, Denmark's Novo Nordisk A/S said it was refusing to lower the price on its most expensive forms of insulin, effectively making them unavailable to Greek patients.

Novo Nordisk said it would supply its older, cheaper forms of insulin at the reduced rate. "A 25 percent price cut does not allow us to run a sustainable business in Greece, and this is what we have told the government," Novo Nordisk said in a statement Wednesday. "We will ensure that there are still insulin products available, albeit not the newest versions."

Danish drug maker Leo Pharma A/S also said it would stop supplying some drugs to Greece. The company makes treatments for psoriasis, eczema and other ailments.

This comes just days after a report that Canada plans to make big cuts in its prescription drug spending, also in response to looming budget troubles and the rising cost of care. The point here isn't that these governments should be spending more on medicine. It's that when governments provide, pay for, and guarantee medical care, it's always exceedingly difficult to keep costs from rising out of control because neither patients nor doctors have any incentive to make prudent decisions about care.

It doesn't require that patients or providers be totally reckless, either; marginal calls about the value of additional testing and treatment are going to be different when those tests and treatments are publicly subsidized. But that results in ever-increasing demand, which results in budget troubles. Inevitably, those budget troubles lead to government bodies making choices about what care to not pay for. And because public health care systems tend to have built-in advantages that allow them to dominate their markets, those otherwise reasonable-sounding budgeting decisions become decisions about what treatments are and aren't available to citizens—which frequently means that citizens get stuck with lower-quality treatments.