Orange County Register, August 30, 2006

Governor should not support price controls on prescription medicines

What does 300 percent of poverty-level living mean? Well, for a family of four in California it means an annual household income of $60,000. And to Gov. Arnold Schwarzenegger it means votes.

A politician pandering for votes in an election year? Unheard of. Well, not really.

Votes are what's behind the governor's ill-advised prescription-drug initiative, which would force pharmaceutical companies to provide brand-name medicines at discounts of up to 40 percent to California families of four earning as much as $70,626.

And what if a pharmaceutical company chooses not to play ball? Well, under the governor's proposed legislation, he can (and says he will) terminate every product manufactured by that firm from the MediCal formulary, the list of drugs approved for sale. That's quite a hammer.

What makes this situation peculiar is that the governor's plan is almost exactly the same as Proposition 79, an initiative that Schwarzenegger opposed and was rejected by the voters in last November's special election. That's right, he was against it before he was for it. But that was then, and this is, well – closer to the governor's reelection campaign.

This initiative will set back medical progress. And it could create a disastrous ripple effect across the entire nation due to the size of the Golden State's economy and the high profile of its governor.

The governor's plan isn't about helping poor people get drugs. It's about imposing price controls on drugs. Such price controls will result immediately in limited choices and availability. Even worse, they will cut into the research and development of new life-saving drugs.

Remember what happened to investment in biotech R&D during the debate over HillaryCare in the 1990s? No? It dried up to a trickle. Impose price controls on drugs, and say Hasta la vista to medical progress.

All too often, politicians create simplistic solutions that end up creating a situation that's worse than the original problem. It's the law of unintended consequences. Quite simply, price controls will result in less access to life-saving medicine for Californians.

There are better, more effective, free-market solutions. For example, the pharmaceutical assistance programs offered by most large drug companies already provide their medicines at deep discounts – even free – to those in need.

To improve these programs for the people of California and the nation as a whole, Gov. Schwarzenegger could work toward authorizing the pharmaceutical industry to create a single, unified program allowing qualified individuals to register one time for all available prescription discounts. Such a beneficial program currently is prohibited by anti-trust laws.

If our political leaders (whether in Sacramento or Washington) opt for ill-advised price controls, breakthrough drugs will become unprofitable. And the pharmaceutical industry will stop trying to develop them.

According to the University of Connecticut's Center for Healthcare and Insurance Studies, government interference in drug pricing since 1960 has caused $188 billion in lost spending on research and development. And, according to Sally Pipes of the Pacific Research Institute, the "lost" medicines that might have been developed with that money could have saved 140 million life years.

In his most recent State of the State speech and in a widely discussed letter to Congress, Schwarzenegger said it is unfair and inappropriate that U.S. consumers bear a disproportionate share of the cost of developing new medicines that benefit the whole world. He encouraged Congress to demand an end to price controls in foreign countries and vigorously support those pharmaceutical and biotech companies that refuse to sell their products to countries imposing price controls.

That was a brave and honest position in these days of Big Pharma bashing. Some people don't like pharmaceutical companies, others don't like food companies, and still others aren't fond of insurance firms. The governor appeared to understand at the time that if you have a market-based economy, you play by market rules.

He should remember what he said, unless the governor wants to earn the sobriquet of "Terminator" for ending choice today and progress tomorrow.

Peter Pitts is Director of the Center for Medicine in the Public Interest
Copyright 2006 The Orange County Register