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Monday, July 11, 2005

More on Drug Costs

The problem of high cost drugs in the US will not be solved by FDA approval or tort reform. The problem is that the drugs are astronomically expensive to develop and the U.S. carries the development costs for the rest of the world.

Typically it costs over a billion dollars to produce the first pill sold; subsequent pills may be produced for pennies. The billion dollar cost is spread out over every pill that is sold during the life of the patent on the drug compound. You get what you pay for and if there is no profit for the pharmaceutical company their investors will find better uses for their money.

The Canadian Government limits its drug costs by buying in bulk with the threat of a (low cost) mandatory license of patents that protect the pharmaceutical company’s intellectual property rights if the price is too high. The reason a generic drug is cheaper than a branded drug is because the generics do not invest billions of dollars in research and development. Intellectual property rights (the patent system) were developed to protect and encourage R&D Investments, and benefit each of us.

The Canadian Drug Distribution system is not a free market system. It receives cut rate prices by threat of government action. When this happens in the U.S. we call it a 'taking' when it happens in China we call it piracy.

If the people of the United States want to have new drugs available for the cure of everything from viral infections and leukemia to impotence we need to realize that we will pay the development costs. Immense developments are on the horizon and now is not the time to hobble the U.S. pharmaceutical industry.

China is in the process of developing a legal system which respects the intellectual property rights of foreign nationals. Why is it unreasonable to expect Canada and Western Europe to do the same?

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