NCPA - National Center for Policy Analysis


November 19, 2009

Democrats in Washington are out to cut health care costs at the expense of the research-intensive (as opposed to generic) pharmaceutical industry.  House Speaker Nancy Pelosi's massive overhaul of the health car system may cost the pharmaceutical industry $150 billion over a decade.  This is a sure-fire prescription for fewer new life-saving drugs, say Henry I. Miller, a physician and fellow at the Hoover Institution, and Jeff Stier, an associate director of the American Council on Science and Health.

Drugs often improve the span and quality of life in a remarkably cost-effective way.  Innovative new drugs have helped many patients avoid costly hospitalization, explain Miller and Stier:

  • From 1980 to 2000, the number of days spent in the hospital for every 100 people fell from 129.7 to 56.6, a drop of 56 percent -- meaning that Americans avoided 206 million days of hospital care in 2000 alone, according to Medtap International, which provides health economics and outcomes-research services.
  • A study in 2000 sponsored by the Agency for Health Care Policy and Research concluded that increased use of a blood-thinning drug would prevent 40,000 strokes a year, saving $600 million annually.
  • A 1997 study by the National Bureau of Economic Research found the costs of treatment per episode of major depression fell by 25 percent from 1991 to 1995, largely as a result of new medicines.
  • New drugs are also generally better than older ones at reducing mortality; in a study of patients who took drugs between January and June 2000, those who took newer medications were less likely to die by the end of 2002.

Yet Washington has grown increasingly hostile to the industry, says Miller and Stier:

  • Research and development (R&D) investments per new drug introduction nearly doubled between the early '80s and early '90s--but government approvals have been dropping.
  • Even after drugs are approved for marketing, only about three in 10 recoup their development costs.

Nor are the drug companies the only target, say Miller and Stier:

  • The Pelosi bill has $20 billion in "user fees" (read: taxes) on medical-device manufacturers.
  • New devices such as artificial joints, pacemakers and insulin pumps are often developed by small start-ups--those least capable of bearing these punitive up-front regulatory expenses.
  • And the working Senate bill aims to get $40 billion from the industry.

Source: Henry I. Miller and Jeff Stier, "Stop The (Health Reform) Juggernaut,", November 14, 2009.

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