Double-digit Drug Price Increases So Far in 2009

Despite inflation remaining at near zero this year, pharmaceutical companies are jacking up the prices they charge for patented drugs to even more exorbitant levels.

Since the Medicare Prescrip-tion Drug Act7 requires the federal government to pay full retail price, pharmaceutical companies can literally name their price and receive guaranteed payment courtesy of taxpayers. Drug companies receive a substantial percentage of the retail price from private health insurers also, so the more they raise the prices, the more money they make.

Consumers are the ultimate victims. They face higher Medicare premiums and taxes, higher private insurance premiums, more exclusions and higher co-pays, and higher taxes to cover the $600 billion Medicare Prescription Drug Act.

Proposed legislation calls for the FDA to get more funding, so taxpayers may also be contributing to the bureaucracy that serves to protect drug companies against lower-priced competition.

The growing number of Americans without medical insurance and who don't qualify for government aid are priced out of the market for patented medications unless they are economically well-endowed. The federal government recognizes this problem and is proposing that even more tax dollars now be used to subsidize prescription drugs, though not at full retail price.

In fact, one reason pharmaceutical companies are increasing prices is that they fear the federal government will soon require they "discount"¯ their patented medications. So the more they jack up the prices now, the greater amount they will receive after they are forced to lower them via government-mandated "discounts."¯

The chart below "Rising Drug Costs" shows the double-digit price increases that have already occurred on popular drugs in 2009.

How Consumers Will be Protected

We are proposing that the law be amended to allow GMP-certified manufacturing facilities to produce generic prescription drugs that do not undergo the excessive regulatory hurdles that force consumers to pay egregiously inflated prices.

To alert consumers when they are getting a generic whose manufacturing is not as heavily regulated as it is currently, the law should mandate that the label of these less-regulated generic drugs clearly states:

"This is not an FDA-approved manufactured generic drug and may be ineffective and potentially dangerous. This drug is NOT manufactured under the same standards required for an FDA-approved generic drug. Purchase this drug at your own risk."¯

By allowing the sale of these less costly generics, consumers will have a choice as to what companies they choose to trust.

The inevitable concern raised by this free market solution is safety. Who will protect consumers from poorly made generic drugs?

First of all, there will be the same regulation of these drugs as there are with GMP-certified supplement makers. FDA inspectors will visit facilities, take sample products, and assay to ensure potency of active ingredient, dissolution, etc. Laboratories that fail to make products that meet label claims would face civil and criminal penalties from the government.

Secondly, there is no incentive not to provide the full potency of active ingredient in these less-regulated generic drugs. The price of the active ingredients makes up such a small percentage of the overall cost that a manufacturer would be idiotic to scrimp on potency.

Companies that foolishly make inferior generics will be viciously exposed by the media, along with the FDA, consumer protection groups, and even prescribing physicians who will be suspicious if a drug was not working as it is supposed to.

Companies producing inferior products will be quickly driven from the marketplace as consumers who choose to purchase these lower-cost generics will seek out laboratories that have reputations for making flawless products.

These substandard companies would not only be castigated in the public's eye, but face civil litigation from customers who bought the defective generics. When one considers that GMP-certified manufacturing plants can cost hundreds of millions to set up, a company would be committing suicide if it failed to consistently produce generic drugs that at least met minimum standards.

Mollifying the Cynics

No matter how many facts I list showing that these free market drugs will be safe, there are alarmists who believe that even if one person suffers a serious adverse event because of a defective generic drug, then the law should not be amended to allow the sale of these less-regulated products.

What few understand is that enabling lower-cost drugs to be sold might reduce the number of poorly made drugs. The reason is that prescription drug counterfeiting is a major issue today. Drugs are counterfeited because they are so expensive. With a month's supply of free market simvastatin selling for only $3.20, it is difficult to imagine anyone profiting by counterfeiting it. So amending the law to enable these super-low-cost drugs to be sold might reduce the counterfeiting that exists right now.

Another reason these less-regulated generics will do far more good than harm is that people who need them to live will be able to afford them. The media has reported on heart-wrenching stories of destitute people who cannot afford even generic prescription drugs. They either do without, or take a less-than-optimal dose. The availability of these free market generics will enable virtually anyone to be able to afford their medications.

Preserving Our Country's Financial Future

The cost of prescription drugs is a significant factor in today's health care cost crisis, a problem that threatens to bankrupt consumers and this nation's medical system. Passage of common-sense legislation would quickly slash the cost of generic drugs so low that consumers could obtain them for less than what their co-pays currently are. Enormous amounts of money would be saved by public and private insurance programs, and ultimately consumers.

According to the Government Accountability Office (GAO), all federal revenue will be eaten up by government outlays for Medicare, Medicaid, Social Security, and public debt interest by 20258,9 just 16 years from now!

We as a nation can no longer afford to be bound by today's inefficient regulatory system that artificially inflates the cost of our prescription medications. The money is no longer there to support this bureaucratic morass.

UPDATE

Those who think generic drugs are safe today should be aware of isolated instances when improperly made active ingredients make it into prescription drugs sold in US pharmacies. These defective ingredients often emanate from FDA-approved manufacturers in CHina and India. The FDA gives false assurances that these government-approved laboratories are safe. The reality is that the FDA can only inspect each Chinese drug making factory at best only once every 13 years8. So the protection consumers think they have today is a façade. I would feel more comfortable buying generics from a company that had its own inspectors in offshore manufacturing facilities as opposed to relying on meaningless FDA rhetoric.