A few conservatives in Congress are hesitant to support bills for prescription drugs for seniors. One of their concerns is that the new entitlement would be a step toward a Canadian-style socialized health-care system, which would lead to fewer options and worse service. It is also argued that an ever-increasing federal role would pervert the medicine market as bureaucrats favor some drugs over others and, eventually, tinker with price controls. Given the legislative proposals currently being considered in the House and Senate, it is our view that these fears are unfounded, and that a prescription-drug law actually will be good for the market.
This is not only our position; it’s also the opinion of Raymond Gilmartin, CEO of Merck & Co., one of the top pharmaceutical companies in the world. In an editorial board meeting with us on Tuesday, Mr. Gilmartin said that, “The plans [in the House and Senate] and what the president has put forward would increase competitiveness in the market as companies vie for new beneficiaries who weren’t covered before.” Currently, almost 50 percent of all Medicare recipients do not have adequate prescription-drug coverage that allows them to get the prescriptions they need. Once a prescription-drug law is passed, pharmaceutical companies will get more business as millions of Americans will be purchasing drugs they couldn’t previously. Selection shouldn’t be affected either, as the same doctors will continue to write prescriptions for the same patients.
Another reason why a Republican-driven prescription-drug law is beneficial to U.S. drug companies is that it will protect their patent rights. Foreign outfits ripping off U.S. patents pose one of the largest economic threats to the American pharmaceutical industry. Currently, there is measurable political support among liberals to bring in pirated drugs from Canada and Europe because they are cheaper. (Forgers avoid the high research and development costs of legitimate firms that actually create new medicines.) Take away the prohibitive pricing problem that exists now, as the developing legislation would do, and the pressure to import cheaper drugs disappears and U.S. patents are safe, at least in this country.
The last major business reservation about the prescription-drug law is that it could have a chilling effect on innovation. This scenario partially depends on the institution of price controls that would lessen profits and thus the funds available for research; it also is concerned with a fear of the unknown in the political future. Again, industry leaders are comfortable with current proposals.
Yesterday, Carl Feldbaum, president of BIO, an interest group representing biotech firms, told us, “After years of pondering the possibility, a prescription-drug law now would provide a measure of predictability that helps our companies plan for the future and raise money for research.” Investors hate unpredictability; potential investors in R&D firms especially are reluctant to dedicate cash to programs that have the possibility of being terminated midway. If passed, the prescription-drug proposals on the table would give investors confidence that the system will be stable for the foreseeable future.
A good debate over a prescription-drug entitlement is healthy for health-care policy. It is important, however, that theoretical risks and benefits of a monumental policy change be analyzed outside of Washington political circles. Some conservatives have attacked the prescription-drug proposals in the name of defending American businesses. In the past few days, we’ve met with the heads of two major business groups in the field who say current House and Senate plans take Medicare in a more market-oriented direction. They also strengthen U.S. businesses and protect intellectual property. Add these policy benefits to the political windfall passage of a prescription-drug law would bring, and Republicans have win-win legislation on their hands. With one less issue to demagogue, Democrats are worried — and should be.
