NCPA - National Center for Policy Analysis


August 24, 2006

Under a new discount drug deal, more than 5 million Californians, nearly 15 percent of the state's population, will benefit from discounts on prescription medicines, says Investor's Business Daily.

Under the new law:

  • Most of the cut-rate drugs will go to families of four or more who earn up to about $60,000 a year, or three times the federally established poverty level.
  • Another 400,000 who have high medical bills relative to their incomes yet earn a bit beyond that threshold will also be eligible.
  • The discounts, which the drug industry has three years to negotiate with the state, will cut as much as 40 percent off brand-name medications and up to 60 percent off generics.

Unfortunately, a measure of income divided by family size is not sufficient, says IBD. Too many factors — from spending habits to work history to issues of personal responsibility — must be weighed to determine who is truly needy. The government is not up to that task.

And penalizing companies that don't participate by having their medications taken off the list of approved drugs paid for by Medi-Cal, the state's health insurance program for the poor, will only create more need, as drug makers pull out of the state rather than sell their products at costs that will hurt their businesses.

Price controls, whether on food, energy or medication, never work out as they are supposed to, says IBD. There will be shortages of whatever good or service the government tags with price ceilings. It's an elementary law of economics: Supplies fall when prices fall.

Source: Editorial, "California's Real Drug Problem," Investor's Business Daily, August 24, 2006.


Browse more articles on Health Issues