NCPA - National Center for Policy Analysis

Drug Price Controls

February 17, 2004

With the Medicare prescription drug program projected to cost $134 billion more than originally planned, it is hardly surprising that Congress is talking price controls, says the Washington Post.

Before the call for price controls gains too much momentum, lawmakers should make sure they have looked at all the options. Governments are notoriously bad at setting prices, and the U.S. government is notoriously bad at setting prices in the medical realm, says the Post:

  • Sen. John Breaux (D-La.) has written of how ludicrous it is that surgeons come into his office lobbying for the Senate to approve payments for one particular medical procedure or to raise payments for another.
  • The Congressional Budget Office has also stated that government interference would have a "negligible effect on federal spending" because the private plans will do just as good a job.
  • U.S. drug makers already spend $30 billion on research and development every year, which is vital to innovation and the development of new drugs.
  • At least some downward pressure on seniors' drug prices will, as the CBO points out, come from private insurance companies that participate in the new Medicare prescription drug program.
  • More will come, over the next few years, from the new drugs that annually become available in generic form.

Markets don't work well without correct information. If Congress really cares about making sure drugs are used in the most effective and most economical ways possible, it should put more effort into ensuring that doctors and patients know enough about the drugs they are taking, says the Post.

Source: Editorial, "Pricing Drugs," Washington Post, February 17, 2004.


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