Cutting drug prices and saving lives

I often thought my cat Sobo had the best drug coverage available – my wallet. But little did I know how much better off pets are than humans when they need prescription drugs.

There is a health crisis sweeping this country – the soaring prices of prescription drugs. Drug prices are rising twice as fast as the inflation rate, even as the number of people with prescription drug insurance continues to decline. Approximately 70 million Americans have little or no prescription drug coverage. This number is expected to increase as HMOs and insurance companies stop providing prescription drug coverage.

Uninsured people are grossly overcharged for prescription medicine. The prices uninsured individuals and families pay for prescriptions is about twice what the Departments of Defense and Veterans Affairs pay for the same drugs. In many cases, uninsured families are charged two or three times more than their insured neighbors, even in the same pharmacy. Similarly, uninsured people pay 30 percent to 70 percent more than Canadians for the identical prescriptions.

Even my cat Sobo gets a better deal than uninsured families. Veterinary medications often sell for less than half of what the pet owners pay for the exact same drug for themselves. If you purchase Lanoxin for heart failure, you will pay $25.65 to treat yourself, but only $6.36 to treat your pet!

The pharmaceutical industry roughly agrees with these figures. A June 2000 newspaper advertisement sponsored by PhRMA, the drug industry’s lobbying arm, states that private insurance companies pay drug prices 30 percent to 39 percent lower than the prices charged to individuals without prescription drug insurance. The critical factor is that uninsured people have no one to negotiate on their behalf to get the lower prices that insured people receive.

People are risking their health when they have to decide between purchasing food or medicine for themselves or their children. Seniors are especially vulnerable to high drug prices, because they consume one-third of all prescriptions and many live on fixed, low incomes. According to studies by the National Council for Senior Citizens and the American Association of Retired Persons, those who cannot afford exorbitant drug prices cope by sharing drugs, skipping doses or simply doing without medicine.

The debate in Washington continues, but it’s unclear that any action will be agreed on. The Republican proposal in Congress, which is supported by the drug industry, would provide huge subsidies to insurance companies to offer private insurance for prescription drugs. But the health insurance industry candidly says that even with federal subsidies, they do not believe they can offer affordable insurance and make a profit in a market where drug prices keep rising and the sickest people are the most likely to buy the coverage.

Since action at the federal level is unlikely, the states must provide leadership. Michigan must act to address this problem.

Some states are proposing to act as negotiators to lower prices for the uninsured. Maine recently enacted a law to make prescription drugs affordable that can serve as a model for Michigan. The Fair Drug Pricing law, passed with near-unanimous bipartisan support, directs the Maine state government to use its bulk-purchasing power to negotiate rebates and steep discounts from drug manufacturers and pass the savings on to those who have no prescription drug insurance. The program doesn’t cost taxpayers a single penny because the administrative costs are paid out of the rebates from the drug companies.

Drug companies assert that laws like Maine’s will hurt their ability to research and develop new drugs. But this claim is absurd, because the pharmaceutical industry is the most profitable in the world. According to an April 2000 report from Fortune magazine, drug companies reported a profit of 18 percent compared to 5 percent for other industries. Drug companies spend twice as much on marketing and advertising as on research and development. They spent nearly $2 billion on direct advertisements to consumers in 1999. And if prescription drug prices were reduced, a Merrill Lynch study finds, an increase in sales would offset any loss.

Drug companies also try to describe this kind of legislation as price controls. But this claim is also wrong, because what this legislation would do is let the State of Michigan negotiate on behalf of 1.3 million people without prescription drug coverage to get the same discount rates other large organizations and insurance companies receive on behalf of their clients.

Medicine is not a luxury. Medicine should be affordable and thus available to fight disease. Michigan should act to bring down the high cost of prescription drugs for all individuals and families. In the end, it’s about saving lives.

John Freeman was in the Michigan House from 1992-1998, representing a district including Madison Heights. He is now with the Center for Policy Alternatives, a bipartisan policy organization, in Washington,
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