California Focus: Demagoguery on drug prices (State mandate will discourage new drug development)

Orange County Register ^ | September 22, 2006 | Paul Howard

[calcowgirl]

In late August, Gov. Schwarzenegger and legislative Democrats struck a blow for the "needy" – defined as families making up to three times the federal poverty level, or about $60,000 a year.

They did this by agreeing on legislation that links deep discounts in drug prices for uninsured individuals and families to the states' Medicaid program, Medi-Cal. Manufacturers who don't offer "acceptable" prices to the state negotiators would find their drugs removed from Medi-Cal's list of drugs approved for millions of Medi-Cal patients...

California's plan is pure demagoguery, price controls masquerading as government compassion. While the plan may help some families with very high prescription drug costs, the state is sending a message to drug developers that it will expropriate future profits. It is an alarming development indeed when the state that leads the nation in biotech innovation feels like it can strangle with impunity the goose that lays the golden eggs.

Demagoguery on drug prices is only possible because Americans are utterly confused by drug pricing and don't understand why branded drugs in the U.S. are so expensive – and so much cheaper in Canada and Europe.

New drugs are expensive primarily because drug development is an extremely arduous, unpredictable, and time-consuming process. Companies looking to develop new medicines must navigate four arduous stages, with costs and risks escalating at each stage.

(snip)

Taking into account the many expensive failures along the way, economists estimate that it may take over a decade and more than $1 billion to bring a single new drug to market.

If they are to survive, drug companies must recoup all of their investments, make a profit, and fund new research and development from the handful of drugs that are commercially successful before their patents expire, and they are replaced by cheap generics.

[Mase]

It now costs about $800,000,000 to develop and bring a new drug to market. Remove the profit motive and development will cease. Unfortunately, this will occur at a time when technology is rapidly advancing and as we're fighting more and more superbugs that are resistant to existing drugs. Nothing could be more stupid.

[Squawk 8888]

If they really wanted to help people get affordable drugs, they'd call in Wal-Mart.

http://www.freerepublic.com/focus/f-news/1705565/posts