Price controls

The key question lawmakers needed to ask when they were told by the pharmaceutical industry that “price controls do not work” is, “Do not work for whom?” Because for all the bluster about state and federal bills that seek lower drug prices for the public, negotiated prices are commonplace in the industry.

A bill supported overwhelmingly by the Legislature would set Maine drug prices here according to the much lower prices in Quebec. They are lower in Quebec because Canada, like many industrialized nations, negotiates prices with the industry, just as health-maintenance organizations do in the United States. The transaction gives manufacturers access to a market in exchange for lower prices to individuals in that market. Such exchanges are common in business, and are the basis for everything from group insurance rates to discount packages on tour buses.

The federal Department of Health and Human Services this week found that Medicare recipients who lack drug coverage — nearly half the total in rural areas — pay about 15 percent more for their drugs, when they can afford them, than those with coverage. With manufacturers’ rebates to insurers, the gap grows to 40 percent or more. That is, some seniors have drug coverage because insurers representing them negotiated lower prices with drug manufacturers. The manufacturers regain some of their lost profit by charging higher prices to those without coverage.

Rep. Tom Allen of Maine’s 1st District has been trying for a couple of years to secure similar negotiated prices for Medicare recipients without drug coverage, but he has been stopped in Congress thus far because of the price-controls argument. This has sufficiently frustrated state-level politicians to submit the Quebec-pricing system in the Legislature and send Gov. Angus King to meet with other New England governors to find a way to simply shop for pharmaceuticals in Canada.

Drug manufacturers do not oppose the reduced pricing system merely out of pique. They say higher costs for drugs allow for more research and better distribution of groundbreaking cures, thereby saving or improving lives. Another reason also is evident if you are a manufacturer and you find it necessary to spend 25 percent or 30 percent of your revenues on advertising: lower prices cut into profits — record profits, it turns out for the pharmaceutical industry these days. And while no one ought to trim profits simply because they have achieved records, there is the issue of Maine people who cannot afford to buy drugs, or cannot afford to buy both drugs and food, and so fall sicker or, for that matter, die.

The drug proposal from the Legislature is appropriate reaction to a system that enforces wide price disparities on essential products. It is not a system that can last for very long, given overall increases in costs to consumers, and Gov. King should make that point clear in his support of this plan.