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Everything is too expensive
December 2019
by Peter T. Kissinger  |  Email the author
SHARING OPTIONS:

I will turn 75 this month. My wife, Candice, has observed for decades that “You think everything is too expensive! Stop complaining.” While it takes $250 to check out groceries at Trader Joe’s today, I observe that procuring a week’s groceries in 1969 cost me $18. Tuition is too high, hotels and rent are too high, athletic tickets are outrageous. The difference between curmudgeon me and grumpy politicos is that I do realize that one person’s expense is another person’s income, including my income.
 
Are prescription drugs expensive? Compared to what? I salute the bipartisan complaints about drug prices. That’s healthy and can sharpen wits. All drugs? A few? Are we generalizing from a few to fit a narrative? What could we do that would matter? Here I list and respond to seven proposals that have come up in recent years:
  1. Only pay for drugs that work. The money-back guarantee is more interesting the higher drug prices go. I’m for it, along with amortizing cost over time.
  2. Buy drugs from Canada, a nearby civilized nation. I support free trade, but this is silly.
  3. Take a hiatus on new pharmaceutical research for a few years and devote the hundreds of billions saved to provide therapies we already possess. We will destroy our innovation engine and create baristas with Ph.D.s. Unmet needs will go unmet for another generation.
  4. We should appoint a government commission to establish acceptable drug prices, basing this on average prices in other developed countries. Imagine the diminished capital supporting research on new (high risk) approaches as price control threats loomed? Given the 10- to 15-year R&D lottery, often with no return for patients or investors, we’d have to rely much more on public and foundation support. Many projects would not get funding at all. 
  5. Ease prices by reducing the regulatory friction to get generic drugs and biosimilars approved. This is underway but has stalled due to intellectual property friction. Quality and supply problems are coupled to lower prices. We already have a supply problem for life-saving drugs.
  6. Eliminating direct-to-consumer advertising would save real money. I agree, but I don’t see a clear mechanism to control this in a market economy.
  7. Reduce the duplication of efforts in both academic and commercial R&D. We have too many laboratories chasing the same drug targets. There are “fads” creating R&D bubbles, often draining cash from worthy but less popular topics. I can’t imagine a selection mechanism better than competition. Committees never get it right.
Proposals to reduce prices are based on very limited information in a supply chain that some say is purposely designed to confuse. I’m reminded of university tuition. Published prices have little meaning. I don’t see a premeditated design to confuse, but it happened as payers and patients got separated after WWII. Let’s start with the goal of transparency. Untangling the mess to report actual patient costs will itself cost a lot, but let’s go.
 
Patients have trusted the “do no harm” system for too long. Most patients are not taught to read product inserts. They don’t endeavor to get safety and efficacy information from trustworthy independent sources. Some trust CBD to do magic as advertised. As patients, we need information in terms we can grasp. Has anyone outside of pharmacy, nursing or medical school had even a basic introduction to pharmacology? More is done in preparing for a driver’s license. Comparative shopping for healthcare is coming step-by-step. The enabling tools are feasible. We need to allow time for them to work.
 
The Affordable Care Act included a 2-percent excise tax on medical device sales, profitable or not. To reduce healthcare costs by adding new cost was curious. Billions were collected, jobs were lost, and planned increases in manufacturing capacity were mothballed. The tax was suspended, but is scheduled to return Jan. 1. Imagine the notion of reducing drug pricing with an excise tax on all pharmaceutical sales. “It’s only 2 cents on a dollar.” That might scare us to stop smoking, vaping sitting, and eating processed foods. Then we won’t need as much pharmacology.

Peter T. Kissinger (who can be reached at kissinger@ddn-news.com) is a professor emeritus at Purdue University, founder of BASi, chairman of Phlebotics and director of both Prosolia and Tymora.
 

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