The Free Press, Mankato, MN

January 13, 2007

Our View -- Medicate drug makers with markets

U.S. drug companies have for too long been on a diet filled with government fat. Their appetite for government desserts has swelled their underbelly. It’s time to medicate these drug makers with the remedy of the free market.

The U.S. House of Representatives passed Friday a bill to allow the government to negotiate drug prices with drug companies, something that was prohibited under the new Medicare prescription drug law.

The vote was 255-170 with 24 Republicans voting with Democrats, none of whom voted against the bill. Minnesota Republicans Michele Bachmann and John Kline voted against the free market solution to a price-gouging problem.

Still, it’s refreshing to see Congress adopt an idea right out of a Business 101 textbook. If you buy in large volumes, you should be able to negotiate a lower price per unit with the seller. The seller sees this as a good deal too. They can make as much profit, if they sell more units, even if the profit margin per unit is somewhat lower.

But up until now, the drug companies have been protected from having to negotiate. It’s been illegal for the government to ask for a deal. Drug makers have been able to sell more at the same very high profit level. Taxpayers have paid an estimated $30 billion cost for the Medicare prescription drug program in 2006 alone.

Rep. John Dingell, D, Mich., thinks taxpayers can save money if the government is allowed to negotiate. He and other supporters, including 24 Republicans in the recent vote, point to the Veterans Administration, which is allowed to negotiate prices. A study finds the VA is able to buy prescription drugs lower than others because of this negotiating power. In one case the VA was able to get one drug for a 58 percent lower price than negotiated by private plans.

President Bush has vowed to veto the legislation if it reaches his desk. He couldn’t be more wrong about the issue, or more against the tide of what American people think is proper.

As Rep. Dan Burton, R-Ind., said, “For us to say we cannot negotiate on pharmaceuticals is just crazy.”

Consumers Union and the AARP agree.

Said Bill Vaughan, senior policy analyst with Consumers Union, the publisher of Consumer Reports: “Seniors and taxpayers deserve the best deal possible, and right now, we simply aren’t getting a good price on prescription drugs.”

Remarkably, the nonpartisan Congressional Budget Office said the law wouldn’t help lower drug prices on “the broad range of covered Part D drugs.” But what about some of those covered or part of those covered? Anything would be better than the system we have now.

But as Dingell said, if it will have no effect, what’s the harm in the president approving it?

This proposal is a far cry from the heavy hand of government interfering in the free market. In fact, it is a free market solution Adam Smith, the father of free market theory, would be proud of.

When you have 43 million people buying prescription drugs regularly, you should be able to negotiate some kind of a discount.