Drug manufacturers get caught with their prices up

Pharmaceutical companies are intent on blocking reimportation of drugs from Canada, and they make some compelling arguments about protecting the safety of the drug chain and about the need for companies to recover their huge investments in research.
It obviously makes no sense to buy cheap drugs if the drugs are not safe. And if companies aren't able to recoup their enormous investments in research and development, the eventual result is obvious. Some new drugs will never be developed , because companies won't take the risk of bringing new drugs to the market if they can't anticipate making a profit on those drugs.
That said, pharmaceutical manufacturers are apparently quite capable of being their own worst enemy.
Even as industry spokesmen claim that they are doing everything they can to be fair to American drug consumers, their pricing policies, based on an analysis by the AARP, belie them.
New Medicare discount programs and subsidies, flawed though they may be, promise billions of dollars in consumer savings (and billions of dollars in government payments for prescription drugs.
So how did the makers of best-selling medications respond? By raised prices quickly, at nearly triple the rate of inflation.
An AARP survey reported that pharmaceutical companies increased the prices they charge drug wholesalers for the top 200 brand-name drugs an average of 3.4 percent in the first three months of 2004, while inflation in general was 1.2 percent.
Savings endangered
While the government is prepared to spend $400 billion to more than a half-trillion dollars to provide Medicare recipients with savings on their drugs, the companies are more than prepared to offset at least part of those savings with price increases.
Behavior such as that virtually invites more support for calls to allow the reimportation of drugs from Canada. While the drug discount cards being touted by the Bush administration promise savings of 11 percent to 18 percent, purchasing drugs through Canadian pharmacies can bring savings of as much as 50 percent.
One reason that drugs cost so much less in Canada than here is that the Canadian government negotiates directly with the drug manufacturers for the best prices.
Congress protected the drug manufacturers from such pressure in the United States by specifically forbidding Medicare from negotiating bulk discounts. That was a short-term victory for the drug companies, but in the long run will only encourage more consumers to turn to Canadian suppliers to fill their prescriptions.
Somehow, a balance must be reached between providing Americans with the best possible price for their drugs and providing the pharmaceutical industry with the income it needs to fund future research and to make a reasonable profit.
The system isn't working now because it is the American consumer who is being used as the cash cow, providing the industry with the margins it needs to fund research, make a profit and give consumers in other countries discounts that Americans can only dream of.