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E-mail Print Sensible drug policy
Health Care Op-Ed
By: Sally C. Pipes
9.20.2004

San Francisco Examiner, September 20, 2004

The California Legislature, always eagle-eyed in pursuit of free lunches, has sent four bills to the governor's desk that would pave the way for the importation of "cheap" pharmaceuticals from Canada. Governor Schwarzenegger is already indicating that he intends to forge a different path for reform.

Several weeks ago, the governor announced that the state would create a "California Rx drug discount program whereby the state would negotiate lower drug prices with the U.S. pharmaceutical companies for the underinsured and the uninsured."

This carefully targeted solution avoids the many negative consequences associated with importation, such as price controls. Price controls may seem appealing, but the long-term effects are devastating to innovation and investment, as much of the rest of the world has seen.

That's why Dr. Milton Friedman and more than 160 noted economists signed an open letter to Congress late last year on the consequences of price controls on the pharmaceutical industry. As they concluded, "Even the threat of price controls reduces the incentive to develop new drugs."

There is also the safety issue. Because the Canadian market is too small to meet U.S. demand, imports from other nations will have to increase. Canadian pharmacies already serve as the conduit for shipments from Eastern Europe, Asia and other countries. The Canadian government does not inspect transshipped drugs bound for other countries. Not surprisingly, U.S. inspectors have found that Canadian pharmacies are not as safe as commonly assumed.

Rather than imposing a program with unintended side effects, very specific and immediate solutions should be adopted to help those who truly face serious burdens in terms of drug costs. In addition to the governor's proposed "California Rx," what else can be done?

- Encourage use of existing government programs. The State Children's Health Insurance Program enrolls children from families with incomes up to 200 percent of poverty level in free health insurance. More than 723,000 California children are enrolled in this program, which pays for prescription drugs. Thousands more are eligible but simply haven't enrolled.

California, along with 33 other states, already sponsors a drug subsidy program. The program allows any Californian eligible for Medicare to purchase prescriptions for the price paid by the state's Medicaid program. There's no cost, or paperwork, to enroll.

- Publicize private-sector solutions. In addition to these taxpayer-financed programs, the pharmaceutical industry sponsors programs for low-income Americans. An administrative fee of $12 purchases a month's supply of any Eli Lilly and Co. and Novartis product for low-income seniors or disabled Americans without drug coverage.

Pfizer's fee for a month's supply is $15. In addition, Pfizer offers significant discounts on its products for families without prescription coverage through its "Pfizer Pfriends" program.

Californians with household incomes up to $47,125 can secure a year's supply of any generic drug for $48 through Rx Outreach, a mail-order program. And some of the best-kept secrets are pharmacy assistance programs, under which drug companies supply uninsured patients with absolutely free medications provided they are prescribed at federally qualified community health centers and hospitals.

Instead of supporting importation, which cannot work and which will damage future innovation, the state's lawmakers should think of ways to inform more Californians about the programs that already exist. Fortunately, Schwarzenegger is providing real leadership on this issue by focusing on solutions that are safe, legal, and help those most in need.


Sally C. Pipes is president and CEO of the California-based Pacific Research Institute. She can be reached at spipes@pacificresearch.org.
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