The Democrats bill leaves intact three provisions of the 2003 law that industry analysts agree played a more direct role in boosting pharmaceutical profits. These include a controversial ban on the importation of cheaper medicines from Canada, a provision that forces roughly 7 million Medicaid patients to buy drugs that are not subject to price limitations, and provisions requiring private insurance plans to remain small and numerous, which dilutes their leverage in price negotiations with drugmakers.

Imho the higher prices in the US are the result of an intransparent market (which doc really knows all the drugs and their price/value ratio?), marketing divisions ‘bribing’ those responsible for prescribtions, and a highly effective and successful drug lobby.

This seems to be a quote about the “Festbetragsregelung” (fixed amount provision), that sets maximum prices for reimbursement of drugs containing certain substances by health insurance companies (there are several hundred of them, there isn’t a nationalized sstem). This doesn’t dictate any prices to the industry, it just says that the insurers only have to reimburse a fixed amount for a drug containing a substance (or a combination of substances) that’s on the list. New drugs are excempt from this regulation, in order not to hamper progress (that’s what the part about patented drugs is about).

The idea is to provide an incentive for the customers to not chose the most expensive drug when thre is a choice of several products with the same effect. The customer may still chose the most expensive one, of course, but he has to pay the difference to the regulated maximum price then (on the other hand, our system doesn’t know your ‘donut hole’). This provision resulted in a significant reduction of costs for german health insurance companies. But this is not at all the same as setting a fixed price for a drug! Another glaring example that a columnist may prove everything if he takes quotes out of the context and leaves the readers in the dark about the proper circumstances.

That’s an opinion piece, CS! Apart from the questionable calue of the WSJ opinion section (a hotpot of lobbyissts and administration officials, imho), these articles are not fact checked! I’m sure I could find a rebuttal if I searched Brad DeLong’s site, for instance.

By the way, I also found the answer to your query about why Germany abandoned some of their price controls here:

Increased spending due to over-consumption and the use of less effective medicines eventually forced Germany to remove patented drugs from reference pricing and reimburse them according to market prices. When Dr. Baldur Wagner, Germany’s State Secretary of Health, exempted innovative drugs from the reference price system, he explained that “by correctly abolishing the reference price for patented drugs, more research is now taking place.� It is also particularly worthy to note that although market pricing increased providers’ spending, it reduced hospital costs because it boosted the usage of newer, more effective drugs that prevented hospitalization.

Now, come on, CS, where did you get this info? What european nation are you talking about?

Imho this has more to do with strong pharma lobbies than with real problems financing the R&D of new drugs.

CS, sry, but that’s just a rumour. In fact, at least in Germany, drug costs are higher than in most other countries. German governments always tell the public there can’t be price controls since the high prices are necessary to pay for R&D costs, which can’t be retrieved in other national markets…

One of the posts on here earlier talked about the US “subsidizing� Canadian and European buyers. This is a deception. Drug companies can be quite profitable selling for the prices they offer to other buyers.

Actually not, GD. The fixed price of drugs in Europe and Canada is formulated on cost plus normal profits, not cost plus normal profit and R&D cost (or put another way, not allowing the higher profits that lead to investment in the industry). Do you really think the same amount of money will flow to pharmaceutical company stocks if the yield were comparable to an industry with lower risk?

Right,And accordingly, the VA administration for example doesn’t force drug suppliers to sell their drugs at artificially low prices, but instead at the lowest prices they sell their products on the open markets. The companies have total control about the prices of their goods. And at the same time the Veterans get the best deal that the market has to offer, only fair imho. Plus it greatly reduces the opportunity for corruption in the VA administration. Everything is transparent and can be checked by the oversighting instances. What exactly is the problem some conservatives have with this procedure?

For example, look at the chemo drug, Taxol. NIH researched it, FDA allowed it to be approved as an “orphan drug” by pretending it was only going to be used for cervical cancer. Bristol Meyer Squibb holds the patent, keeps the profit, charges what they want, then gets the media to say if we negotiate the price down it will cripple drug company R&D.

I’m a big proponent of honest free enterprise, but most free-marketeers are really ignorant of these kinds of manipulations of the public and abuse of taxpayer dollars. I see it all the time, and nowhere more devious than this attempt to keep us from getting the best prices for our tax dollar supported purchases. We play a huge role in making these companies profitable. There’s no excuse for their manipulation to keep us from getting the same prices that they willingly offer to others, including the VA, Canadian and European buyers.

I tend to agree with one of the other commenters: When the government makes a purchase, or has reason to make one, it participates in the free market and the free market benefits from a new buyer. Why the free market should be open to private entities but not governments wishing to make purchases baffles me. In short, I support the direction in which the Dem’s are headed, though there are obviously many details to work out, including whether or not negotiations can exclude certain drugs from the approved “buy list.”

I posted on this a while back at CS, linking to two articles that lay out some of the pros/cons: http://centralsanity.blogspot.com/2007/01/of-concern.html

Hope they are helpful.