Critical Condition

Prescribing Higher Health-Care Costs

Today’s LA Times features a trenchant critique of the latest fashion among Washington health-care reformers: Try to squeeze pharmaceutical companies to cut costs. President Obama has already gotten drug makers to commit to pony up $80 billion and perhaps even more to help close the donut hole for seniors getting pharmaceuticals through Medicare Part D — the prescription-drug program that was implemented in January 2006.

And plans are underway that could result in restricted access to more expensive drug treatments among patients on government programs such as Medicare and Medicaid. If a “public option” is included in any new health-care legislation, the new participants will not have access to cutting-edge drugs if federal bureaucrats determine them not to be cost effective even if they are medically effective. This falls under President Obama’s desire to cut costs by implementing comparative-effectiveness tests.

Hoover Institute fellow Henry Miller and American Council on Science and Health associate director Jeff Stier argue that these efforts are bound to backfire. They write that “drugs often improve the span and quality of life in a remarkably cost-effective way.” By obviating the need for costly procedures like emergency-room visits or surgery, prescription drugs actually generate massive cost savings. Indeed, research from Columbia professor Frank Lichtenberg estimates that for every dollar spent on newer pharmaceutical drugs, hospitals save over seven dollars.

By targeting drug firms, lawmakers risk crippling research into future cures, raising long-term health costs, and reducing jobs in this sector. 

Sally C. Pipes is president and CEO of the Pacific Research Institute. Her latest book is The Top Ten Myths of American Health Care.

Sally C. Pipes is the president, CEO, and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute. Her latest book is The False Promise of Single-Payer Health Care (Encounter). Follow her on Twitter @sallypipes.

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