- The Washington Times - Tuesday, October 25, 2005

Ronald Reagan observed, “Politics is supposed to be the second oldest profession. I have come to realize that it bears a very close resemblance to the first.” Recently, so too does Republican policy-making. This week, under the cover of deficit reduction, the party of Reagan is on the verge of abandoning the party’s commitment to controlling spending and free market principles.

Rep. Joe Barton and Sen. Charles Grassley, respectively the chairmen of the House Energy and Commerce and Senate Finance Committee, were supposed to come up with ways to reduce Medicare and Medicaid spending. Instead, they actually increase it, specifically by asking taxpayers to pick up the full cost of Medicaid in Alabama, Mississippi and Louisiana (that’s on top of health-care funds for the victims of Katrina in those states), raising physician fees paid by the two programs by about $10 billion a year, and adding middle-class families to those entitled to Medicaid or state-run children’s health plans.

Both chairmen propose to pay for this spending spree by imposing price controls on all drugs. Prices for drugs could not be higher than a new federal formula; particularly newer medicines that allow people to get their cancer care at home instead of the hospital. And for good measure, both lawmakers plan to eliminate generic-drug competition — from brand drugmakers — in order to enrich other generic drugmakers. Quite simply, if a brand drug company wants to take any of its products generic, Messrs. Barton and Grassley would have Medicaid — which gets the best price companies give to private health plans — use the generic price as the government-set price for remaining brand name business.

Supposedly, the price controls and elimination of generic competition will save money. It is hard to see how. In the past, cancer centers have responded to price caps on new cancer drugs by using older drugs that have more side effects and require more drugs and hospitalization to provide treatment. Applying the generic price to the brand and generic version of a product taken generic by its developer is being depicted as a mone- saver, too. But this provision will discourage brand-company launches of generic drugs altogether. That means the small group of generic firms that get 180 days to exclusively market a medicine whose patent they successfully challenge can charge anything they want, which is usually just a shade below the brand price.

For example, the price of Andrx Corp.’s generic version of the ulcer drug Prilosec was so close to the price of the brand-name medicine that many large insurers did not even try to switch patients to the generic. In the absence of real generic competition, the best brand price under Medicaid is actually lower than the price of the generic drug with marketing exclusivity. In fact, the more generic versions of a drug in the market, the faster the switch to generic is and the faster and lower prices fall. Do Messrs. Barton and Grassley think that generic drugs made by the same company that invented them are not kosher? More likely, they simply want to eliminate competition in order to bolster generic-drug profits at the expense of consumers.

You would think that the White House might have a shred of principle and oppose such approaches, particularly when it had already come up with $10 billion of savings without resorting to such twisted measures. But apparently the Office of Management and Budget thinks that expanding entitlements, price controls and protectionism are just dandy ways to achieve “deficit reduction.” (It should have checked with the FDA, which has found generic competition by brand companies to be pro-competitive.) Ironically, since few Democrats will vote for Republican-initiated proposals under any circumstances, it will be left to Republicans on each committee to endorse policies that they would be attacking if the Dems had proposed them.

Yeats wrote that, “the best lack all conviction / And the worst are full of passionate intensity.” He could have been writing about Mr. Grassley, Mr. Barton and the White House, all of whom are tarnishing the Reagan legacy with proposals that expand government involvement in health care with protectionist policies that favor a few companies in ways that will make cancer patients suffer and undermine the free market.

Republicans are complaining about Harriet Miers as some sort of failure of ideology on the part of the president. The problem goes much deeper and the blame spreads wider still. This is a party that has lost both its principles and leadership. By abandoning the Reagan legacy they will bankrupt America in more ways than one.

Robert Goldberg is director of the Manhattan Institute’s Center for Medical Progress and the chairman of the institute’s 21st Century FDA task force.

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