Pharmaceutical lobbyists are once again mad as wet hens at Rep. Tom Allen’s dog-and-pony show on prescription drugs. Rep. Allen’s recent comparison of drug costs for people vs. those for animals not only outfoxed the industry’s public-relations department, it highlighted a useful point often missed in the debate over drug pricing.
Democratic staff members on the House Government Reform Committee found eight drugs that were manufactured and dispensed in similar forms, quality and dosages for humans and animals. After examining research and development and liability costs, they concluded that seven of those drugs cost far less for animals than for people, specifically the senior citizens whom Rep. Allen is trying to help through a bill that would negotiate discounted drug prices for Medicare recipients.
The findings in the study do not mean that drug companies regard access to drugs for seniors as less important than for animals. It means they know their markets and what costs their markets will bear. Costs shifting — having one product within a business cover the costs for part of another — is not unusual in many industries and is common in health care. Privately insured patients, for instance, help pay the costs of the uninsured or those publicly insured. What Rep. Allen and many others properly object to is where the pharmaceutical industry has chosen to shift costs: to seniors without drug insurance and least likely to be able to afford it.
Not only do animal owners get a break, but so do purchasers of prescription drugs north and south of here, in Canada and Mexico. Health maintenance organizations, through the buying power of the number of patients they enroll, are able to attract favorable deals with drug manufacturers. And the federal government gets a discount when it comes to coverage for veterans. These deals have neither driven drug companies out of business nor cancelled their research and development programs, two charges the their lobbyists routinely make about Rep. Allen’s proposal.
They don’t because as these deals arise the drug industry shifts costs to other consumers to keep stockholders happy and allow R&D to generate profits in the future. There’s nothing outrageous about this, just as there is nothing outrageous about a member of Congress saying that a certain group of citizens — in this case, seniors, who usually are far more dependent on prescription drugs than the general population — should not have the cost shifted to them.
The animal study done by the House is merely one more way of showing that drug manufacturers have latitude in deciding how much to charge for their products. Nothing miraculous there — just horse sense.
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