Chicago Tribune - June 3, 2004

Two recent developments:

- Last week, the senior-advocacy group AARP and the consumer organization Families USA fanned the flames by releasing two new studies. Those studies claimed prices for name-brand medicines most often prescribed for seniors have risen far faster than inflation in the last four years. AARP's study of 155 name-brand drugs found an average price increase of 27.6 percent over four years, ending in December 2003, compared with a 10.4 percent inflation rate. Families USA found on average, the 30 most often prescribed drugs for seniors rose 6.5 percent in 2003. That's compared to a 2.27 percent inflation rate.

- The same day, Abbott Laboratories was forced to defend a 400 percent price hike in its popular AIDS drug, Norvir, in testimony before a National Institutes of Health panel. Critics argued that Abbott developed the drug with government funding, so other companies should be allowed to make cheaper generic copies before the patent expires. Their argument: A 1980 law known as the Bayh-Dole Act required companies to market the drugs to the public under "reasonable" terms. They argued that a 400 percent price increase was not reasonable. So the advocates asked the NIH to allow the generics, in effect forcing the company to reduce its prices.

Though drug prices are drawing more fury, answers haven't been easy to come by.

The Bayh-Dole law, for instance, wasn't intended to control prices, as one of the law's sponsors, former U.S. Sen. Birch Bayh, told the NIH panel. Moreover, it is notoriously difficult to trace exactly how much government money contributes to the development of a specific drug.

In 2001, for example, the NIH attempted to account for its contributions to a list of 47 blockbuster drugs on the market. Because of the complexities of such a study, however, the NIH could only say that four of them were developed with significant public funding.

NIH and other federal programs contribute heavily to the billions spent every year on medical and drug research and development in this country. But there's also more to a drug's price than its development; huge sums are needed, for instance, for FDA trials.

This page has endorsed the move to legalize reimportation of drugs from Canada and elsewhere. More political leaders are signing on to that as well. But the sense here is that Congress might attempt to massage this issue past the November election without enacting new law.

If prices keep rocketing, there's also bound to be another push to allow Medicare to bargain collectively for seniors when the new prescription drug benefit starts in 2006. The concern there is that a move to allow the government to bargain directly would effectively create price controls on drugs and drive innovation from the market. But if prices continue to far outstrip inflation, it's not hard to imagine that such a move will gain strength in Congress.

A new Medicare-sponsored drug card was launched this week. It will be a first test of how effective large groups of seniors can be in driving harder bargains with drug companies. The early results are disappointing, but the concept--empowering more consumers to act in concert through private markets--is the right one. If it turns out to be the wrong one, drugmakers may find even more public pressure to go the drastic step of government intervention on prices. And that would be a disaster for everyone.

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